The PC and Apple TV are on the same network, no subnet.
The Apple TV is only an extender, passive device so why does it need an internet access point to function for home sharing?
If I allow internet sharing though the laptop PC's wireless internet adaptor which is on another subnet it works perfectly, but I don’t want the network with my entertainment and audio devices to have internet access.
AppleTV requires internet access to work properly.
This seems to extend beyond simply not allowing the internet based functions to work.
The problem you have I think is related to the DRM on the TV Shows - an internet connection is required for 'authorisation purposes', and I think this is for AppleTV2 to stream content not just for iTunes itself.
I took an AppleTV2, iPad, and a new Mac Mini on holiday a few months ago - I had no usable internet connection but set up a LAN using a mi-fi device.
I could play unprotected content on AppleTV 2 from the Mini having previously configured Home Sharing, but any DRM protected movies/TV Shows would not play as AppleTV 2 flagged 'authorisation issues'.
This really is stupid as iPods/iPhones/iPads do not need authorisation on the go and all AppleTV2 does is stream from an authorised library.
Add to that the fact that I just plugged the Mini in to the TVs HDMI port and could play the DRM protecetd content without any issues without an internet connection.
Trying to Airplay from ipad pre-configured for Home Sharing to AppleTV2 just brought up authorsiation issue errors again. Airplay is over-rated.