Why does my apple tv constantly stop streaming and become unable to connect to itunes?

Question

I have a 2nd gen Apple TV, which I bought in Dec'10. Lately, as in the last month, it just stops streaming. It will be streaming content, then all of a sudden, it stops, and bar comes up on the bottom of the screen, showing the length of the video, with a spinning icon on the left, where the play/RW/FF icon usually appear. It never recovers. I'll stop the video, and try playing again, but it will say that "netflix" or "iTunes" etc. is currently not available. It's as if it's getting knocked offline. I check my setting, and the ip address is fine, it is not assigning itself an ip address. My internet is working with no issues at all. I'll try doing a network test but it sits there trying to connect to itunes, then it says it's unable to do so.
It's becoming more and more frequent. The only thing that works is resetting it, and sometimes even that doesn't work. So, I have to restore it. I've had to restore a couple times in the past month, and I'm resetting almost daily.
Also, sometimes it just reboots itself for no reason at all. This, too is occuring more and more on a regular basis.
I have the apple tv plugged right into my Time Capsule via ethernet. The hdmi out is going to an input on my surround sound receiver. I've also bypassed the receiver, just to rule it out. I typically get anywhere from 30-40 mbps when I do a speedtest from my macbook on speedtest.net or speakeasy. I'm mentioning this because my connection is more than sufficient to stream the 720p content the apple tv is limited to. My interenet has gone out in the past, but it's rare. It's not the culprit, since someone is always on line when this happens, so we'd know right away if it was the internet going out. It's always the first thing I check when this happens, even though I'm pretty sure my connection is not the issue. Also, I don't start freaking out, the second it happens. I usually don't look into it until a minute or so after the video has frozen. At that point I usually hit MENU, to escape the current screen, then try playing the content again. That's when it can't do anything, and I'm often forced to reset or reboot.
I have tried searching for others with this issue, but haven't come across anything. The closest I've seen are situations where people can't stream at all, due to a network issue. Also, it's been getting worse, which makes me wonder if it's a hardware issue. Again, the apple tv is on a wired connection to my Time Capsule, and the ip address is not self assigned, it starts with DHCP, not 169... And, my internet connection is not the issue.
Any help would be appreciated, and sorry if I repeated myself, I just wanted to make sure I didn't leave anything out.

Answer 1

I had problems with streaming until I changed the WiFi channel that I was using.  The original one conflicted with my neighbor.  After that, MOST of my streaming problems vanished.  Occasionally, a movie would pause for more buffering and I eventually ran an ethernet cable from the Apple TV to my Apple Extreme (to eliminate the Wifi).  I have not had a single problem since then (except to repair the drywall after running the ethernet from one floor to another).  :-)