Can Apple TV play movies stored on an external drive?

I have a 64GB Apple TV and have been buying movies and tv show episodes from the iTunes store so I can play them on my tv through my Apple TV.

The tv episodes are HD and are roughly 1.67 or so in size, and I don't want to fill up my hard drive with them. I'm also thinking about maybe filling up my ATV's space with media.

I have a 1TB flash drive. Would I be able to store these on my flash drive, connect it to my Time Capsule and play them on my Apple TV?

They may be taken out of iTunes library when I do that, Apple TV ok with that?

Just looking for options here, I haven't tried using the Apple TV for anything I have that's not in iTunes.

Thanks in advance!