OK, no answers!
I've played music via the ATV3 for several hours without dropping the signal, so obviously the 5.2 update cannot handle the bandwidth to play movies.
I see other people here and elsewhere in the forums have the same problem. Bad Apple for not thoroughly testing.
Next question is, can I revert back to 5.1?
I have this exact same problem too. Last night I was using Apple TV to provide music from iTunes and it would stop playing - entering pause mode - after every song or so. Pressing 'play' brought it back to life. The only thing that has changed in my setup is the 5.2 upgrade - before that, everything was fine.