I had the same problem for all versions.
Currently I connect the streaming server to a Dell 24" 1080p monitor which has both DVI and composite inputs. I connect both of them (with a HDMI to DVI cable). For the HDMI, when playing netflix, it turns to black but the audio works normally; for the composite output it always works well. I found that for HDMI ouput I can play local video files perfectly. Only netflix doesn’t work for HDMI outputs. It must be a bug in the netflix client software. I didn’t try it with a HDTV since I don’t have one now.
Hope WD can fix this problem because Netflix is the whole reason I bought the device.