It likely is a bandwidth issue or some other “weak link(s)” somewhere in your home network. So, don’t blame the WD unit for the problems.
I can successfully use Twonky Beam app on iPad to stream all sorts of media within the home network (incl. MKV) to WDTV, Roku, iPad.
If you want to stream ISO files to tablets, phones, etc., look into VLC Streamer app. Search this forum for my comments about these apps.
But, again, you need a very robust home network to have success with any of this streaming stuff. Otherwise, one gets what you are describing. If the home network is up to the task, then using wired and wireless connections are both successful.
1080p over wireless is never going to happen really, and 720p could, but all you need is DTS sound on a film Mkv and its too much.
It all depends on your router, what type of house you have, how far away you are streaming etc…
The only way I could stream 720ps was by getting a RT-56U and have a usb cable of about 7m length a dual-band USB-N53 Asus wireless adapter, and that going out over and hanging down between the bannisters pointing to my living room door…and even then it would flake out sometimes.
Xvids easy peasy, you start sharing 5-8 Gb Mkvs its a real pain.
For me its hard wired or not at all. I beleived all the hype about Super-router + Super Wireless adapter = xx mb/s. I was had