Well, I finally solved the mystery in part for my setup - UPnP.
The new WD was returned to the store - it was having problems from the get-go and could have had differing issues. The old WD I have (gen 1) always worked so I figured I’d stick with the known worker and try and solve the issue there.
It was the ability to play a converted file with the network disconnected - that got me thinking and a lucky search came up with this.
Turns out that, for some reason, the WDTV (old and new) has issues with the QNAP putting out UPnP SSDP broadcasts other than just for the Twonky and that by updating the firmware the enable UPnP option seemed to come on. This is what I switched off and everything works perfectly. The strange thing is that the unit had been working fine for a number of days/weeks after the QNAP was updated. Perhaps a reboot of the unit or the router caused a problem.
The new WDTV was probably giving better hints when it complained about losing the media server connection/was unable to find it. I am glad that I returned it though as the fact it exhibits the same issue as a 4+ year old device means there is little hope of a fix.
No other device connected using UPnP/DLNA had a single issue (tablets, phone etc). This seems to be a real firmware issue as it appears to be a matter of how it is dealing (or not) with the SSDP broadcasts which affects the internal state of the device.
Glad to be back to normal as I do love the simplicity of the device.
