Subsequently, I installed Twonky for DNS-323 works perfectly. I am glad that for now, but I would do the streming MKV.
streaming mkv with twonky from dns-323 to ps3 is not worth the hassle, because it means that mkv file has to be transcoded and dns-323 just does not have enough horsepower for that.
So, I'm a bit baffled here what a program installation would accomplish.
i accomplished the following:
1. installed funplug, got ssh access to my dns-323 (needed for following steps)
2. installed twonky media server which seems to be much more reliable and accessible than media server that came with the unit
3. installed transmission so my dns-323 can purr away downloading music and movies for me, day and night. i add torrents remotely with my laptop from work of wifi cafe
all my knowledge comes from knowing exactly what i need and reading a bit of stuff smarter people have written for guys like us.