Streaming movies w/ Time Capsule

Have other users done this?
1. Store movies (AVI's, MPG's, MP4's) on an external (USB) hard drive.
2. Plug hard drive into Time Capsule.
3. Access the files over a wifi network via iTunes, Front Row, or Finder.

If the files are viewed with Finder, the frame rate is acceptable. Under iTunes or Front Row, the screen output freezes sporadically; so does the software itself.

The problem persists, even if the files are stored on the TC itself (not on the external drive).

Possible solutions:-
* AppleTV
* use a Mac Mini instead of the Time Capsule
* some other hardware-based media streamer

Comments?

tc data rate

what transfer rate does the time capsule support?

i have the Apple TV but as it only had 160 GB HD i have a 500GB HD FW800 drive storing the movies and it joins the wireless network and streams upstairs perfectly. Even with iMac in sleep mode it still streams movies. Only variation was Terminal Command to tell iTunes to look to Ext HD rather than iMac HD. USB may not be a good choice and certainly thru Time Capsule is adding another layer to the process.

That's neat. ATVFlash and AppleTV together should do the job. Thank you for your help.