Migrated from iMac to MacBook - How to setup AppleTV?

I migrated my daughter's iMac to a new aluminum MacBook this weekend. She has a lot of movies and TV shows that we had dumped to a 500Gb external hard drive with her iMac. Now that we've upgraded to the MacBook, obviously an external drive is no longer a viable solution for storing her iTunes library on. I tried moving her library to a network drive, but AppleTV doesn't seem to like that option. I am guessing because the library is not connected directly to her machine, the WiFi can't simultaneously grab the file from the network drive, while transmitting to the AppleTV.
How should I set this up now? We do not have a hardwire in her room, and she is sometimes sitting in the Living Room using her MacBook while she wants to watch one of her movies on the AppleTV.
I thought about consolidating our Libraries on my iMac - but as she uses Front Row on her machine to watch TV in her room too, there's no way to stream the video through iTunes between my iMac to her MacBook - can only stream music through iTunes, right?
This has got me stumped. Any help would be appreciated!
Here are the equipment options in the house -
Airport Extreme
Airport Express
Her 13" Aluminum MacBook
My 24" Aluminum iMac
An old G5 Acrylic in the Kitchen
2 AppleTVs (one in Living Room, one in my Bedroom)
I'm willing to employ any / all of them to figure this out.
EDIT - Can I hook up the 500Gb external drive to the G5 Acrylic in the Kitchen, sign into her iTunes account on that machine and setup AppleTV to use that machine and iTunes. Then point her MacBook iTunes library to the external drive hooked up on the G5 Acrylic so she can use Front Row in her room?

Sorry,
AFP Airport Utility file sharing check box and wan. Finder preference check box show servers on desktop. Finder GO command "connect to server" empty window type afp://10.0.1.1 which should be your local network. Hard drive should mount then you are in business. You'll have to put up with some of the quirks but learnable and doable. Also if N 5 GHZ wireless does not seem to work efficiently then try N+B/G 2.4 GHZ wireless.

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