I am experiencing the exact same symptoms as described by Jmack. And I want this fixed. However I think it is Apple's problem, as explained below.
For the record, I was at firmware version 1.09 and just upgraded to 1.10, the behavior is the same for both versions. My iTunes client is version 10.5.2.11.
I simplified the problem as follows: on the DNS-323 iTunes Server settings, I cleared the "Root" check box and set the Folder to a directory that contains a single album of mp3 files, there are about 14 mp3 files in this directory. I also downloaded mp3val as suggested by thejinx6 in the previous post. I used the mp3val tool to scan the files in this directory and there were no problems at all. And still, the iTunes client behaves just as Jmack described. When I click on the NAS entry under SHARED on iTunes, it takes a moment to load, then the 14 files appear for about 1 second, long enough to see that it is looking at the directory that I expect, and then iTunes clears the frame and shifts the focus back to LIBRARY:Music.
I used Wireshark to capture the protocol transaction between the NAS and my PC, and I can see the DAAP conversation. I am an embedded software engineer and I work on network devices, so I am accustomed to debugging problems with Wireshark, but I am new to this particular protocol. Wireshark shows the transactions at all its layers: TCP, HTTP, DAAP. The DAAP and HTTP look complete and normal. If I expand the DAAP content, I can see the catalog of mp3 files from the directory. At the TCP layer, it is the iTunes client PC that sends the FIN first, and the server sends a FIN after. Given the that the DAAP transaction looks complete, I think the FIN from the client makes sense. It is logical that once the client and server have exchanged the catalog information, the client will close the connection until the client needs to perform some further action in response to user input.
What I would conclude from this is that the problem is more likely in iTunes than in the NAS. I will take this information over to the Apple discussion forums.
If someone at D-Link would like to have my packet capture I am willing to share it.