Yes, this is the replacement. The odds on it being hardware are now pretty small at this point, so the problem must be something to do with the network setup. As I mentioned, it works fine when wired, and streams internal stuff just fine wirelessly even.
Some other threads here say the ATV2 tries to use certain ports on the router that may be a problem. Another thing I am wondering about is whether the "send information to Apple" option has something to do with it (but if that were the case, why does it work OK when wired into ethernet directly?)
Given that my other 14 wireless devices work just fine, what is the deal with this?