Here are some of my observations after having some time to play with the WDTV live and how it compares to the original.
1. The GUI and navigation is is MUCH snappier compared to the first one. The remote feels much more responsive, and you can go through the menu much speedier than before. (I know alot of people including myself were annoyed with the laggy interface)
2. In addition, loading times are much quicker as thumbnail art comes up almost instantly whereas before it would take a few seconds for each thumbnail to one by one show up. Fast forwarding, skipping, going back also happen much faster. Also scanning drives for media is A LOT faster as well. I have two 2TB drives hooked up at the sametime both full, and the original wdtv took about 15 minutes to scan everything which was really annoying. Now it takes about a minute tops, very impressive indeed.
3. Some large (20-25gb) bluray MKV files that used to playback very pixelated on wdtv1 playback flawlessy on the wdtv2, which was one of my biggest concerns.
4. Mac Formatted drives work seamlessly, finally. My drives are mac journaled, and although the wdtv1 could recognize and play them. It would always come up with a "storage cannot aggregate" error message, and I wouldnt be able to access sorting features like date, most recent, and playlists. Now it finally has full support.
5. DTS down mixing does indeed work. I know that was one of the biggest gripes with the last one, and because i have two tv's one with surround sound and one without, not being able to play the movies with digital audio was annoying. With the wdtvlive however, i have been able to play each mkv dts file perfectly with audio in sync.
6. Drives now automatically shut off when you turn off the player. This is an awesome new feature, because before the drives would just go into sleep mode, and you would have to physically unplug the USB chord from the player to get them to power down.
7. One negative thing i have noticed though is the overall picture quality of every video file i have tested looks worse compared to when it is played on the wdtv1. It is much granier, less vibrant, less sharp. It almost looks like a DVD which is pretty scary, considering they are 12gb 1080p MKV's. I have tried everything (8bit and 12 bit settings, my tv brightness/sharpness/contrast settings) and for some reason the picture quality is just plain sh**ier. The difference is noticeable enough to where i might just keep using my wdtv1. Im not sure if the upscaling is different, or if it has to do with the missing display output settings (1080p 60hz, 720p 50hz, 480p etc the old one had) but it is really starting to become aggrevating, because picture quality is always the most important feature in my opinion. I have tried it on two HDTVs a 42in 1080p LCD and a 42in 720p Plasma both hooked up via HDMI. I am very confused why the quality is worse.
Other than that i havent messed around with any of the networking features yet, unfortunatley.