I rip all my music CDs to my desktop PC HD as both WAV and MP3. Both formats are backed up to external USB HD. (I use the MP3s for a pocket player, and in the car.) When I connect the external USB HD to my new router via one of its USB ports, and set up the router to serve the content as media, I see the symptoms already noted. This BD player is supposed to see the files, but does so only rarely. When I select MUSIC in the BD player menu, the router is (usually) in the list of available devices, along with any disc in the drive, or thumb drive or other drive connected to the BD's front USB port. Sometimes I can select the router and navigate to a file and play it, but usually not. I just get the LG version of a "busy" cursor. If I do make it to one file and play it, I'm done. I cannot select another file without restarting some or all devices, have not documented this yet. The exact nature of the problem might also depend on router settings, but there are not very many in the media server section.
I have several ways to play the WAV files, but option (3) in the OP might be the best, and it's the one that does not work right. My desktop PC is getting old, and I think the fidelity would be better with option (3). I have the means to test this, but have not gotten around to it yet. Even if the fidelity is the same, it's nice to have the option to play all my music thru the BD when the PCs are off. I'm not going to change my WAVs to some other format, nor burn them back onto disk as something else, I am happy with them as WAVs. Just wondering why this method will not work.