I have all the itunes media in a single folder and the problem still exists.
Yes, there may be some file corruption but this does not explain why when I roll back to firmware 1.03, the problem disappears even though I have made no changes to the itunes files.
I have also tried drastic measures such as reformatting Volume_1, copying back all the itunes media from another drive. The problem still exists (with 1.04).
The itunes media folder is about 40GB.