You can stream from an external USB/Firewire drive attached to the Mac/PC running iTunes quite successfully.
Unfortunately AppleTV's USB port is for Apple diagnostic/internal use only so you cannot connect a USB drive to increase local storage for syncing.
Streaming can work very well (in fact some of us don't even bother syncing and just stream to some machines) but it is dependent on your local network being up to the task - some things you've got control over, others like interference from neighbours wireless/microwaves etc you haven't (for wireless).
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