I've actually managed to stream 1080p 5.1 surround WMV and AVI (or mp4, can't remember) files over wireless N from the DNS-323 to my media streamer and it didn't stutter at all. No one was more surprised than me. Whether or not that was down to how much data the media streamer was buffering, I don't know.
I've got my DNS-323 with 2 Seagate hard drives in RAID1 (ST3500320AS 500GB SATA II 7200rpm 32MB Cache)
Are there any configuration options in VLC player regarding how much data to buffer?