Well you people. I was able to get Netflix running on my Generation 1 Apple TV. They said it could not be done, but it is working great.
Only catch is:
You have to use PLAYON to make it work. And you will play NETFLIX via the PLAYON software running on the main house server.
PLAYON sets up a server on your main computer that transcodes-translates the incoming NETFLIX stream into a DLNA or UPnP stream.
Then your APPLE TV Generation 1 can use that play via XBMC (latest version) running on the APPLE TV.
It runs nice. No issues. No problems.