I have the same issue. select WD Discovery from the CD, and Windows Firewall and Spybot gave a warning. Have not got working still, despite making exceptions. It just comes up with “WD Discovery has encountered a problem and needs to close” repeatedly. Have also tried Dynamic and Static IP. I use Time Capsule (XP) as my NAS. It works but I cannot access the WAN- ie. YouTube, Flickr. Hope WD post solution in Support portal soon.
Network Connections on WD TV says Network is fine, but when I “Check Connections” it cannot resolve the DNS, it has no spaces or special characters either.