I can report the same thing with my 323. Originally I had it pointed at \Volume_1\Music but then decided to move my whole 'My Music' folder over so I changed the path to \Volume_1\My Music\iTunes\iTunes Music. The NAS showed up in iTunes but it prompted me for a password. Odd, I hadn't set one so I went back, removed the password and hit save. From that point on the iTunes server didn't work and anytime I go to the iTunes server it craps out and the entire web interface is unaccessible for a 30 seconds or so. Eventually, I can log back into the interface but anytime I go to the iTunes setup it freaks out.
I used the 'Restore To Factory Default Settings' option and set it all backup again, this time leaving it pointed to \Volume_1\Music and things are back to normal.
The URL of the broken iTunes interface, in case it matters, is http://NASIP/web/advanced/iTunesServ.asp?id=9116474
Here's a picture of the iTunes interface hosted over at bayimg.
http://bayimg.com/pAKHgAAbp