I hope this helps everybody having this problem. I had been having this problem ever since the ios release that introduced wifi sync.
I tried unistalling and reinstalling itunes. I tried hardwired vs wifi. I was getting very very ******. Then, after searching
Through posts i found something and tried it. I took it a bit further than what was posted and violla, no more drop outs!
Here is what i did. I am running itunes on windows vista 64 somi am not sure if this will apply to all OS platforms.
First thing i did was made sure the ports listed in this article http://support.apple.com/kb/HT2463 were added to my widows firewall.
Second, i took every **** ios device that i owned who's master itunes was the same as my home sharing server and tethered them to this server. For each device i checked "sync using wifi" and hit apply and then sync. Then i UNCHECKED the same option, hit apply and synced again with each device.
I dont remember if i rebooted vista or not but it cant hurt. I did reboot appletv.
After i did all this, knock on wood, atv2 has had no more dropouts!!! I believe the key is NO WIFI SYNC ON ANY DEVICE IN YOUR HOUSE