Apple TV will only play one track at a time, can anyone help?

Hi,
I have Apple TV model #MC572LL/A which I think makes it 2nd gen, right? I've had it for a couple of years, never really had a problem with it until maybe the latest update of the firmware (5.2), or maybe the latest iTunes (11) or maybe my brand new Win8 Sony Vaio or maybe since I reset my home wifi router 10 days ago, whatever, all these things happened at once, and all was fine until something went wrong sometime last week.......
All of a sudden this started happening:
I'll play a movie (which I have imported into my iTunes library as a 'movie', not a 'home video') and it plays fine. At the end if I want to play another movie I go back to the movies menu, scroll down to another movie, select it and the spinny thing in the center of my tv screen starts spinning......and stays spinning.....forever.
The same thing happens if I play a music track. At the end of the track in an album or playlist it will move on to the next track on the TV screen but nothing plays, the tiny spinny thing under the progress bar just sits there spinning.
I have tried restarting Apple TV and factory resetting Apple TV to no avail. When I restart Apple TV I have to turn off home sharing in iTunes then turn it back on again by signing in before I can see my library on my TV screen.
If I go to my PC and close iTunes and re-open it I can then play another music track or movie. At the end of the track, if I go back to the home screen UI I can see all my movie covers or album covers along the top of the TV screen if I am on the green 'computers' icon. Anything I select to play will not play if something else has just been played.
I have home sharing on, obviously, I have one wifi network, one Apple ID, one wifi router, one PC, one iTunes, one TV, one Apple TV, a very simple set-up. It all worked fine last month.
Please help, it's driving me crazy! Thanks!

Can't help you with your problem, but just a heads up:
The 2nd generation AppleTV is very valuable, if you ever decide to sell it.
Check it out on eBay...

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