It's been a long time (many, many firmware revisions ago) since I took a look at the media library feature on the Live-SMP. I've had it turned off and not used since pretty much the beginning. The reason being that at the time it did not work for DVD.iso files. I have all my TV show DVD's ripped as DVD.iso and have over 500 iso files on the servers. I'm not about to even think of ripping out individual episodes.
So with the latest firmware, does the media library handle DVD.iso yet?
I have been playing DVD iso files from a media library for at least a year now.