AVS Special Member
Join Date: Mar 2007
Location: Long Beach, California
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Sorry, I can't say what the problem is, but I can say what it isn't - it's not WHS 2011.
The Dune accesses the ISO using file requests, either through SMB or NFS, and Windows Home Server doesn't know what the file type is. It can't downgrade the video, because it doesn't even know that the data is video. For all WHS knows, the Dune could be accessing a spreadsheet.
The HDMI output is controlled by the Dune. It is the Dune that is deciding to down-sample to 480p. But that decision is based both on the configuration you selected (unlikely in this case, as the menu is in 1080p), and the EDID data received from the display device. It is not unusual for EDID data to cause this sort of problem.
Do you have any other displays that you can test with? Like an LCD TV? Also, does every BD ISO have the problem? Or could it be related to frame rate or video format? For example, might the projector have a problem with VC1 video but be fine with H.264 video? These are the types of EDID problems that could cause the Dune to down-sample.
Now, why the problem would surface when you switched from FreeNas to WHS is the real puzzle.