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I stream from my external hard drive (portable)...the Mac that it's connected to obviously has to be on though.

So yes, it does work.
 
In terms of my setup (Firewire), I don't see much lag at all. I think it's more my network issues than anything.

I've had to extend my network with an Airport Express to get Internet back in my room from the AEBS. Either way, even with that setup I've had very, very few issues.
 
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