The WD TV has a user upgradeable firmware.

The unit was released in November 2008, with firmware 1.00.01 on board. Western Digital's product manager Scott Rader has posted in AVS Forum (and other forums), with the message that WD is "committed to the WDTV and other entertainment products, and will release regular updates for the WDTV" (post 1, 2, 3, 4).

A first update (1.01) came in December 2008. A new firmware 1.02 was first hinted at, then announced by Scott on AVS Forum, in various posts between January and April 2009. When the 1.02 went public (1.02.07), Scott re-iterated in a Twitter message that development will continue...

Release history

Latest generally released official firmware is 1.02.07.
There is no need to install each update, just go with the latest one, it contains all the improvements of previous firmware (unless otherwise noted in release notes).

• 1.00.01; preloaded factory firmware.
• 1.01.01; 2008-12-22, the 1st firmware upgrade.
• 1.01.02; 2009-01-02, fixed a minor inconvenience of the 1.01.01 release. Was made available without any public fanfare.
• 1.02.00 - 1.02.06; a series of pre-release (beta) versions in April 2009.
  
• 1.02.07; 2009-04-22, pre-release (beta). Declared "public release" on 2009-04-27
• 1.02.08; 2009-05-18, pre-release (beta).
• 1.02.10; 2009-06-17, pre-release (beta).
• 1.02.11; 2009-10-1, pre-release (beta)
  

Warning: 1.02.00 until 1.02.08 firmwares contain a significant bug if you're using Greek subtitles: they do not remain on screen for their intended duration, but seem to flash on-screen for a fraction of a second. (read more). If this applies to you, you may choose to stay with 1.01.02 (or revert to it). Or use 1.02.10.

Warnings / Remarks

• WD officially does not support downgrading firmware to a previous version. A widely used downgrade method is discussed below. It's also used to change back and forth between official and unofficial firmware.
  
• For firmware upgrade, it's recommended that you put the firmware on a small memory stick, and remove other hard disks from the unit. You MUST NOT eject the USB device during the upgrade.
  
• The upgrade takes about 5 minutes. You can even see a YouTube video of an upgrade ;-)
  

How to revert (downgrade) to an earlier firmware version

Warning: Western Digital does not officially support firmware downgrading. Use this method at your own risk!

Many users have used the following method for downgrading from a more recent release (e.g. 1.02.07 or an unofficial firmware), to an earlier release (1.00.01, 1.01.02 etc). Basically, it is the same process as the firmware upgrade, except for modifying the wdtv.ver file to trick the WD TV to recognize the older firmware as being new:

• Download the older firmware to your computer
• Uncompress the firmware ZIP file to the root folder of a memory stick or hard disk: there are 2 files wdtv.ver and wdtv.bin
  
• Open file "wdtv.ver" with notepad
• Change VERSION='1.xx.xx' to VERSION='1.05.00' (or any number higher than the current version installed)
  
• Perform the normal firmware upgrade procedure
• Plug the USB memory or disk into the WD TV, which will recognize a new firmware (because 1.05.00 is higher than e.g. 1.01.02)
• Press HOME, and then select the Settings bar.
• Select the firmware upgrade icon, and then press ENTER.
• You are prompted to perform the firmware upgrade.
  
• When done, the WDTV (system menu "About") will report the correct firmware version, not the fake version you wrote in "wdtv.ver"
  

References: post 1, post 2.