I was so impressed with my initial Apple TV 2 that I promptly went out and bought another one for the family room. Then the connection issues started! I could see my library on my C drive but when I decided to move it to a WD 1TB USB Hard Drive, I couldn't find the library and once I got that fixed, it took forever to load a program. Therefore back to the C Drive and now I keep copies of all my media on a couple of TB drives I have as backup.
Just for info, always have your library backed up to another exterior hard drive, as I managed to have 500 gig of media get toasted when an external drive crapped out. I then had to grovel to Apple to let me download all my media I had purchased from Day 1 for free (which they are not obligated to do!). They graciously loaded all my purchased media on automatic download and within two days and 500 gig later I got most of it back!
My connectivity issues were driving me crazy! I could manage to get to my library and select a movie or TV show from the library, but after 20 or so minutes the Apple TV would lose it's connectivity to the library. My show would stop and it would return to the main menu and show me that there was no connection to my 'Home Sharing". So finally after the third day of this crap, I tore apart my network (Win 7) and started Troubleshooting! I will spare you the gory details of this process but will tell you what the fix was!
I determined the issue was not with the Apple TV but was with the Home Sharing or the "Home Group" in Windows 7. I managed to fix both Apple TVs by doing the following:
a. disconnected both Apple TVs and then restored them both by directly attaching them to my computer with a micro USB cable with nothing else attached (Blackberries use the same cable for sync) and by following the prompts in ITunes (the TVs connect just like any other Apple device);
b. by searching through all the notes I could find about Home Groups, I found out that third party Firewall software (I was using AVG Internet Security 2012) had known connectivity issues with Home Group! I then disabled the AVG firewall and turned on Windows Defender instead (I am not to concerned about Firewalls as I have one modem and a wireless router both running hardware Firewalls before they get to my network, so really the software firewall is redundant).
Once I reconnected the Apple TVs to their respective LCD screens and re-connected them to my library and Netflix, they worked like a charm and have not dropped off the network once and it has been a couple of days now! Now I can watch what I want when I want and not have my I Pad 2 sitting beside me so I can connect to my computer upstairs and close and restarted ITunes to get the Apple TVs to restart!
I have no idea if this "fix" will solve your issues but at least it is another lead for you!