Streaming from a uPnP media server is definitely better than using the network shares -disabling transcoding, not needed by the WDTV- at least in my experience, even if you don’t have network dropouts. I was lucky with this, but even in a best case scenario - my WDTV can access the network shares through an account protected by password, with no dropouts and without tinkering with the security policies of my PC - I still cannot do without a media server, because even though it works for 99% of the media files I play, some HD files have bitrate peaks that the WDTV live can’t read fast enough from a network share, causing video stuttering at some points.
At least with my gear (wired connection), and apparently on at least other person’s, transfer rates are sort of “capped” at around 20-25 Mbit/s when the WDTV reads a network share; again, SD videos and music will play fine with that sort of speed, but those HD videos with higher bitrates will stutter. Playing the same videos through a media server (TVersity, Twonky… ) was smooth as silk even for the most demanding videos, with the server streaming the videos at speeds considerably higher than needed when it wanted to. In your case I’d say this is even more important, because wireless puts yet another speed limitation.
Btw I posted a link on this forum to a test video I encoded that provides an extreme example of this, you can use it to test your setup if you want. If you manage to get it to play without stuttering on the WDTV through a network you can be 100% sure that no video will ever stutter because of network performance at least, as it has bitrate peaks easily over twice as high as most 1080p encodes. With a media server on a wired connection it should be np, but with a network share it chokes badly. I can only think that it will be very difficult to play smoothly on a 802.11n connection even with a media server, and through a network share it will be a disaster.