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Your problem with some file formats not playing will more than likely be down to the Netgear box not supporting the wide array of file formats and codec variations you'll find in use on the net. All proprietary players suck because of this. For something cheap and very full featured, try Raspbmc on a Raspberry Pi (with the optional codecs and a remote control). Raspbmc will play absolutely anything you throw at it.

On the server side it's much easier. Either stick with Plex (it will probably be fine streaming to a decent player like Raspbmc / XBMC) or you could try something like MediaTomb or PS3 Media Server, both of which offer transcoding too (for shitty players).

http://mediatomb.cc/

Works great with my PS3! Just make sure you hook up your console with an Ethernet cable - I got a lot of stuttering on fast-paced video over the wireless. I can play full 1080p MPEG4 video over 100 Mbps Ethernet.

I use MediaTomb for my digital media library. It manages all my music, videos, and photos and is quite extensible through scripting if you are familiar with JavaScript. Then I use XBMC or my PS3 as the front-end to MediaTomb. I'm currently managing over 1 TB of data without issue. I cannot speak for other media, such as books, as all my books are still in dead tree format.

Further to my post..
http://mediatomb.cc/
That's what I use.. it's not very user friendly but very customizable.. I have it (almost) setup exactlly how I want it, and doesn't require much

Playstation Media Server is what I recommend when people want something that just works, and the media server is a Windows Box (also runs OSX and Linux I believe). Seems pretty sweet honestly, but haven't tried it myself.
http://ps3mediaserver.blogspot.com/
or
http://code.google.com/p/ps3mediaserver/

Good luck, if you go with MediaTomb and have any questions let me know and I can try to help.

I use Mediatomb personally, for streaming from multiple Linux PCs to my PS3. All of them show up nicely under the Video and Music options in the XMB. It even supports real-time transcoding for my FLAC music.

I don't care about exclusive games particularly. I was waiting for UT3 for Linux, but it's looking like that might never happen, so I've got it for the PS3. With a wireless keyboard and mouse, it's pretty nice. (I'm too old to be anything but a convenient target, but it's fun.) "Resistance: Fall of Man" is an exclusive, and I'm slowly getting used to using the controller for an FPS... meh. The kids like playing "The Simpsons Game" with me, and I've got a PS2-to-USB adapter that lets us use a PS2 controller so we can double up. Bought "flOw" from the network, not bad. Worth $8, anyway. It's the 40GB model, so no PS2 games... but we have a PS2, so oh well.

The Blu-ray stuff is nice, but I'm not going out and re-buying my library. After the 45 minutes of updating the firmware to the latest version (Oy!), upconverted DVDs look good, and it's much more responsive changing menus than our old upconverting DVD player. (Given the CPU in there, it had better be.) Still, now that the format war is over, the PS3's the obvious choice over the Xbox 360, given that I'm not a big gamer worried about exclusives. It's the best Blu-ray player, and I can play some games with it. For 'drama' movies, DVD is fine, but for the occasional F/X-heavy blockbuster, I'll want Blu-ray. ("Iron Man" will probably be my first Blu-ray purchase.)

I'm going to set up MediaTomb on my downstairs box as soon as I update to Ubuntu 8.04, and then it'll be a nice way to watch videos and play music, too.

Sony made a risky play hitching the PS3 to Blu-ray, but it seems to have paid off. Nintendo made a different risky play eschewing raw horsepower for simple, social games... and that paid off, too. Microsoft didn't take too many risks with the 360, and that doesn't seem to have paid off so hot. (Well, except for the risks that backfired on them.)

The game OS only has limited video/audio codec/container support. The way you might be able to "fix" this is by using mediatomb and its transcoding support:
http://mediatomb.cc/pages/transcoding

But the last time I tried I couldn't get h264/ac3 in mkv transcoded to mpeg2/ac3 at full resolution. Down scaling to PAL and 2 audiochannels worked, the problem was ffmpeg audio sync IIRC.

That's one of the things I love about the PS3-- it works with standard UPnP servers, like Media Tomb. I like having all my music and movies on a single server, accessible from any place in the house, from any computer (including the PS3). I can even get them to my PSP via the remoting of the PS3 to the PSP, which is great for playing music remotely. (It'd be even better if the PSP could work as a UPnP client as well.)

But, I disagree with the Wii and DVDs. I currently have two systems connected to the TV in the living room: a PS2, and a Wii. The PS2 is used exclusively as a DVD player. I'd ditch it in a heartbeat if the Wii played DVDs. Then there'd be one device connected to the TV. Yes, I'd also like to see a UPnP client, just like the PS3. But a DVD player seems so... fundamental.