Just throwing my story into this mess.
I have a iPhone 4 (not 4S) and I have the same problem. Here's my setup:
iPhone 4 ==)) Airport Express ==)) Dlink router == Vidéotron modem
2 gen Apple TV ==)) Dlink router == Vidéotron modem
Computer == dlink router == Vidéotron modem
It started yesterday. I arrived home and my network was not working. I restored the dLink router and had to reconfigure everything (due to that I change the ISSD and password). It took me a while to reconnect the Airport Express (finally saw that you can do it with the iPhone). Updated the Airport Express to 7.6.
Afterwards, everything was golden. But, when I streamed a song to my Apple TV, it didn't play. All I got was: unknown artist, unknown song, unknown album. Afterwards, I tried to airplay the song to my Airport Express, it did not work. Suddenly, my whole wired and wireless network crashed. I could not access the internet from my apple TV (recent model), my iphone 4, my ipad 1 or my computer. I rebooted my dlink router and everything was fine.
I streamed a song from my computer to my apple tv and it worked (for 2 minutes since I stopped it myself). However, everytime that I try to airplay from my iphone 4 (did not try from iPad), my whole network crashes.
I though that it was my router that was broken. Can someone please confirm that this is not a router issue but a airplay issue since I was planning to purchase a Airport Extreme this weekend?
Thanks and hopefully we will get a solution soon!