You can downgrade the firmware on your WDTV Live. I found the last version (which might be two releases ago as I think two came out really close together) played everything perfectly. I have the new firmware now with no problems yet, but I haven't been using it too heavily the last couple of days.
There is also the B-Rad firmware that is supposed to work really well, although I've never tried.
I've found using Twonky on my DNS-323 as a UPnP server has been the biggest improvement in the stability of my streaming to all devices in my house.
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