Shared iTunes library won't stream on Apple TV

I'm using a Time Capsule (connected via Ethernet to my DSL modem) + Airport Express (to extend my network). Everything is working quite well and Apple TV is connected to my iTunes as a shared library so I can watch streamed movies on my TV (I'm not interested in syncing content to the Apple TV). One problem: the movies won't stream. I get a black TV screen with a progress bar on the bottom, and more often than not this will hang at 00:00, or the blue line will start to progress across agonizingly slowly (I come back a half hour later and it's 1/3 of the way across for a 30 min. program) and the actual show will never begin to play.
What gives? I tried restarting my computer and resetting the Apple TV, but the problem persists. I just can't stream.
I'm running the latest versions of Mac OS, iTunes, and Apple TV, BTW.
TIA for suggestions!

I decided to do a factory restore to see if that would solve the problem. Everything went fine and the Apple TV joined my network just fine. However, the software was again V1 so I went to Update Software and chose to download the latest version. The wheel has been turning on "Downloading Software" for almost 2 hours! There is no way to see how fast it's downloading or how much progress there is.
I'm really starting to think that Apple TV is having a major bandwidth problem but I have no clue what to do about it. The 3 other computers on the network have normal speeds (and only one other is running, but not doing any bandwidth-hogging activities), so it's not the actual network, just Apple TV's connection. What could be causing this?

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