Well, what a pain this is! Fortunately there is an easy fix but it does mean that you will have to set-up your XBMC system again and if you have made a load of changes or have got lots of media Sources configured then this could take you a while.
To resolve the problem all you need to do is, via a shell, login to your AppleTV using the credentials: frontrow/frontrow. Once you are in you need to navigate to “/Users/Libraries/Application Support/”.
Within this directory you will find a folder called XBMC. All you need to do is delete or rename this folder and then start XBMC again.
ssh [email protected] cd /Users/Libraries/Appplication Support/ rm -r XBMC exit