I found a fix! I am not sure which of these steps fixed the problem, but this is the process I followed.
 Disabled homegroups on Windows 7
 Enabled the Guest account in Windows 7
 Created a login especially for the wdtv
 On the password page in the WDTV for the computer, i simply entered the username and password WITHOUT the machine prefix.
Previously, I needed I7PC\Josh and the password (ie prefixed with the machine name).
I dropped the I7PC prefix.
I can now play from network shares!
If your machine is on a domain, and you need the domain prefix for authentication, I believe this may cause you a problem.
It works, for now.
I have rolled forward to the latest update, and it is still working.
I’d like to add a comment to this.
During my research to solve this problem, I was shocked with the amount of issues firmware updates have caused on this device. I may still need to roll back if I encounter those. My next media player will not be a WD.
Thanks to everyone who posted their experiences on my issue.