ScottishBloke - I have EXACTLY the same symptoms (I wrote a lengthy post on this a couple weeks back on a different thread). The computer I want to have as my iTunes server (an old 2001 Dell desktop) is unable to serve protected content, ** even after reformatting and installing XP SP2 from scratch **. However, a different computer, hooked to the same router, serves the content just fine. Wired, wireless, firewall, no firewall - makes no difference.
Apple support has been useless. I opened a ticket some weeks ago (paying the $49) and they haven't come up with anything other than "replace the network card and/or the router". Lovely. I am going to try to get my $49 refunded.
Like some others, at one point (a few months ago) protected content worked fine, so it isn't like it NEVER worked. And I actually have TWO Apple TVs, and each has the same behavior.
Very frustrating - all I want is to play my music... --Erik