I bought an ATV 3 about a year ago and at first it was all good. I could Airplay from my iTunes library and it was all perfect, great sound, great stream. Then it started to get glitchy. Now I have to resort to playing music directly via the ATV which distorts on most songs because of the lack of audio control on the ATV. The lack of audio control overdrives the levels going into my audio system. This problem doesn;t occur with Airplay because you can manually redude the audio level either in iTunes or via the remote app.
I have a decent digital audio system connected via the optical audio on the ATV. I'm using Mountain Lion on my iTunes library iMac. I've got a 100mb connection and a good router. Despite all of this the Airplay is poor.
What confuses me is why the Airplay is glitchy but when the ATV plays the same library directly it doesn't glitch! It's all via the same wireless connection.