Hi All.  I have a library that will not fit on my iMac HD (500Gb+).  So I shifted it to my 1TB WD External (USB2 Powered) but it is still in my iMac iTunes Library (just located on USB External). At present my Apple TV2 (720p) will NOT buffer anything located on this External. If i shift a movie to the iMac, it will buffer, put it back on the external, and it won't. 

Im picking that the USB external won't transfer the files through home sharing fast enough to stream. 

A friend suggested that the router may not be good enough for streaming. (which makes sense, but I don't think is applicable as it works fine when the files are on the iMac HD).  So, I thought I would buy a 2TB Time capsule. Enough space to hold my library, and the router built into the TC would slightly improve my wireless setup. 

I Rang apple  and they said that getting a Time Capsule would not improve the situation. THey said the only way to increase buffer speed is to shift the media I want to stream back to the iMac, and possibly upgrade iMac Hard Drive.  This will not work as I have found it impossible maintaining a library in different places, and it is far too expensive to upgrade iMac hard drive. 

My Question to my fellow Geekzonians is that if i bought a FireWire 800 capable external, consolidated my iTunes to the that external, would this still buffer through Apple TV? THis is going on the basis that FW is faster to transfer than USB2. 

If not, what solutions exist? I refuse to believe that no one else has an Apple TV with an iTunes Library bigger than their iMac HD.  Thanks in advance.