If you install XBMC and the TV Catchup plugin then technically yes – I've had this setup running for the last couple of weeks.
However, and it is a big however, I wouldn't consider it a permanent replacement for freesat.
The picture quality isn't amazing even on our 28" TV, and it's noticeably poor on our 37" TV.
Also, the TV Catchup plugin isn't the most stable of software and neither is XBMC for that matter.
I think the ATV+XBMC solution is fine for the odd time that my girlfriend and I want to watch a different program at the same time, but I certainly wouldn't use it as the only source of TV (even for a spare TV).
In fact, we've split the HDMI signal from our Virgin box and run a 15m cable to the bedroom because the ATV just wasn't cutting it.
