Blu-ray vs HD digital?

I have a "vanilla" 5.1 HT system with Sony receiver and plain DVD player. Also, have a 46" Sony HD TV. I want to take the next step in audio and video quality.
Blu-ray sounds great but ... what about a movie server for digital format, like AppleTV or something like that?

The convenience factor seems great for the server approach but, what about video/audio quality?
Is Blu-Ray still king?

Hmmm .... options, options.
In my experience with Directv and a Sony BD player I say the BDP is clearly superior to the Directv HD DVR. You may get different results with the Apple product I have no experience there.
is there actually a way to run HD or BR on a server? I thought that the format is still locked up.
Yup there are several ways. You can use MakeMKV or DVD FAB to rip a complete copy to hard drive. Then use Media player Classic Home Cinema or something like Power DVD. If using across a network, it would be better to use hard line Ethernet. Because the transfer speeds are very high when streaming Blu ray, a wireless network won't be fast enough to handle the bit-rate.
Add the Blu Ray player--with your current system, the audio & video (especially the audio) will be one of the really "jaw dropping" experiences you will have as you progress on your journey to "Audio / Video PhileVille":-)
I agree, go with the Blu-Ray player. If you buy a Samsung you can also stream Netflix, Blockbuster and Pandora.
Most currently offered HDTVs have a resolution of 1080p, and most also have a refresh rate that's divisible by both 60 (for the 60Hz refresh rate of video broadcasting) and 24 (for the frames-per-second rate that film is shot). That's why most LCD HDTVs have a refresh rate of 120 or 240 Hz. Plasma typically refreshes at 600 Hz.

If you have an older HDTV or one of the down-market models with a 720p engine, your TV won't even accept a 1080p signal, let alone a 24fps one. It'll accept a 1080i signal, but downconverts it to 720p.

Concerning the predominant resolution, however, assuming you have a 1080p HDTV, the only source I know of that will feed it its maximum resolution and refresh capabilities is a Blu-ray player. Over-the-air and cable HD broadcasts are 720p or 1080i. I don't know about satellite, but I suspect it's also 1080i or 720p. Apple TV HD downloads are 720p. HD Instant Watch programming from Netflix is also a max of 720p.

Only Blu-ray also offers 1080p output PLUS 24 fps (1080p/24) as well. This synchronization with the speed the film was shot at gives you better smoother motion with less judder.
I would add a Blu ray drive and ATI video card that allows bit streaming to a HTPC(Home Theater PC). This way you can play your BRs directly or you can use it for streaming network movies and can also use it as DVR for OTA or cable TV.

The HTPC allows you endless tweaks to video that standalone Blu ray players don't.

If you're a plug and play guy get the standalone. If you are a tweaker an HTPC. I rip all my movies to hard drive and share with the other PCs in the home. This way anyone on the home network can access the recorded TV shows or ripped movies. Every TV in my home has a computer plugged to it.