1/ I tried the symbolic links strategy but the usb drive didn't automatically index. Not acceptable.
2/ Next I tried replacing the Media Server app with Serviio. Wasn't to difficult and it worked quite well accept for one thing. Every 5 minutes (default setting that can easily be changed) it looks for new files etc. and updates the index sending the CPU to close to 100% which did cause some minor but noticeable jitter during media playback. To be fare, I purposely loaded the system by playing 3 movies back at once on the players around our house. Since this was a realistic scenario around my place, eg. lounge, kids rumpus and bedroom TV's / media players all going at once, have the playback stutter was unacceptable. I could set the update interval to some longer time but this would have a detrimental effect when pushing a new movie to the DS and then wanting to watch it, ie. it wouldn't be in the index so my media players wouldn't see it for some time.
3/ Since my media players are WD TV Live's I found info on the forum that it was possible to enable SMB on the DS and then search for the DS as a network share (rather than media server) through the WD TV Live. I set up a DS user account called WDTV, gave it read/write privileges to see only the media folders (shared folders) that were relevant (rather than use an open "guest" account. When the WD TV Live tries to access the DS, you are challenged for username and password. No problemo. Enter the user name (in this case WDTV) and password and hey presto, your viewing the file lists in the shared folders (video, music, usbshare etc.). Scroll to the file name you want and press play. To save re-entering the username and password, exit the player and go to the WD TV Lives network setup under settings, scroll down to the "Auto login to network share" and turn it on. The WD TV Live will not only remember your username and password, it will automatically and transparently log you into the DS. I've done this for all three WD TV Lives and had them all playing at the same time and CPU load is quite low on my 211J which let's face it, is pretty much entry level. Since there is no re-indexing or index updates going on, playback is all good.
4/ It should be noted that without a media server running to provide DLNA, I can't use a DLNA player on my iPhone for example so if I really get a hankering to play media on a DLNA device I might re-enable the standard one in DSM. For those with PS3 etc. as part of the mix, I suspect that having a DLNA media server running will be a must. All depends on your overall setup.
Playing 3 x 720P MKV's simultaneously from my USB connected drive on the DS, resource monitor shows CPU steady at about 10%, memory steady at 31% and network at under 2000KB/s. I'm running a gigabit network although WD TV Lives only support 100Mbps, ie. no network bottlenecks.
Hope this helps others who might have a similar setup or at least give some confidence when making decisions re setup and hardware.
DS211J DSM 4.1-2668 2 x 2TB Seagate + 2TB Samsung USB
DGN3500 Netgear Router/Modem
DLink DGS1016D 16 port Gigabit Switch
Netgear GS105 5 port Gigabit switch
WDTVLive x 3
PC x 2 LAN
Laptop x 2 WiFi
Transformer Pad TF300
iPad x 4 WiFi
iPhone x 3 WiFi
iPod x 3 WiFi
PS2 x 2
....and a partridge in a pear tree.