Wayne, I am no expert but I did try the server setting on the DNS and noticed the same thing. I didn't like that it was displaying everything as a simple list so I decided to turn that off. Instead of using the itunes server, you can just populate your itunes manually by dragging the files from the DNS mounted drive to the itunes window. You need to make sure that under iTunes preferences (Advanced) you uncheck the "Copy Files to iTunes media folder when adding to library". This means that it will only put a pointer on iTunes to the original location (your DNS drive). I decided that I want my music with me everywhere so I am keeping my music files on my laptop and just backing that up periodically to the DNS. For my Video files, which are much larger, I only have copies on the DNS drive and I am putting these pointers on iTunes. Everything works fine when accessing the Video files as long as I am at home. When I am away, since the DNS is not visible, these simply show up in iTunes as broken links.
Regarding your file transfer speed; are you sure that is 1.34 Mb/s and not MB/s? If it's 1.34 Mb/s that is awfully slow but to see where the problem is you need to say the type of wi-fi you are using (802.11a, b, g, or n) or if your laptop was connected via cable. If it's 1.34 MB/s, that's around 9 Mb/s which would be reasonable.