I had isues with playing hi def (720p/1080p) files on my WDTV Live,
I have now found a solution which works across my 4 various WDTV models.
I am posting this here as i have seen that may others have had problems with mkv files. I am in no way associated with JRiver other than being a happy user.
I use JRiver Media Center http://www.jriver.com/ to stream my media to the WDTV. This is the best streaming software that I have tried.
These settings, which are in the DLNA Server section, work well on a WDTV Live. I am now able to fast forward and pause mkv files
Format: H264-TS very high bandwidth stream auto fps
Enable: DLNA; DLNAExtra; Enable bitrate Field; Present Caption Resources;
Present Small Artwork; Present Subtitle Resources
Empty values for Video MimeType Override & Video DLNA Override