For those of you who use a NAS drive for your iTunes/ATV collection, do you have any recommendations? I am hoping to eventually purchase a 2 or 3 TB version and connect it to our Airport Extreme. (budget = $200)
Also, is there any downside to moving your iTunes collection to a NAS? Noticeable lag, etc?
If connecting to your Airport Extreme, you don't really have to get a NAS - you can just get a USB enclosure and connect to the AirPort through USB instead of ethernet. The AirPort provides the network share. THis will help you meet your $200 price point, as a true NAS enclosure is much more expensive than a a USB device.
I've said this many times, but here it is again. Putting your itunes library on a NAS can be done, but unless you have very specific needs, it is not worth the trouble. If you are looking to stream your media to ATV, you STILL need iTunes running on a computer, so the NAS isn't buying you any more than a direct connect external drive, except for more complexity. The 'iTunes Server' feature that many NAS devices advertise IS NOT the same as Home Sharing, which is what the ATV needs.
Like I said, you can put your iTunes library on a NAS and it will work. I have never noticed any lag in playback. What I did notice is that everytime my iMac rebooted, I had to make sure that the NAS share was mounted before launching iTunes. Not a big deal if you are launching iTunes manually, but a very big deal if you are trying to have it done automatically. If the volume is not mounted when iTunes starts, iTunes will decide that you really want a new library created in the default location, and all of you media will show up as unavailable. This can be dealt with in various ways, but at the end of the day, it has absolutely no advantage over direct attached storage (USB, FW800, TB) to justify the aggravation.
If your main goal for this device is to feed your itunes library to an Apple TV, without jailbreaking or using AirPlay, the simplest and most economical choice is a USB2 drive connected directly to your computer running iTunes. At $200 - I think this is probably your ONLY choice.
If you want something as a Time Machine target, a NAS, TimeCapsule or USB drive connected to AirPort all start making sense.