Hi, I am tearing my hair out at this stage, I thought this was going to be so easy 
EQUIPMENT
ATV2 (with aTV Flash 1.3 installed successfully)
Apple Airport Extreme
1TB Drive (FAT32 formatted)
Macbook Air (OS10.7)
File sharing is enabled on external drive connected to Airport Extreme. Shows up as a Sharepoint Drive on Mac and all folders and files are accessible.
Have installed Media Centre on ATV2 and tried to Add Share.
OPTION 1: AFP Airport Extreme does not automatically show. I have manually added all necessary information but Test WILL NOT Pass.
OPTION 2: Created an SMB Share, added all necessary information and Test DOES Pass. Save Changes. Open up Share, sees drive named ‘Media’ but won’t go any further into drive, gives error message ‘smb://blahblahblah’ does not exist.
aTV Flash is useless to me without this functionality, please help…
You need to reformat the USB drive as HFS+ and not as FAT32. It will work after that.
It is a known issue with the Airport Extreme and connected ATV2 with ATVFLASH
I was afraid of that, thank you for the answer though 
That took me an age to do, but once drive was formatted and all content put back on it, worked instantly without any hassle, thank you for the advice KTJensen, you’ve no doubt saved my weekend
Hold on. I am changing my opinion about this. Depending in the tools you use you could have problems.
1). Using only a apple computer to format a USB drive with HFS will work well. Go ahead and do that.
2). Using a WIN7 computer with PARAGON HFS software. Bad idea. This software has has problems remaining connected. Format tool from PARAGON seems to work.
3). Using a WIN7 computer with MACDRIVE HAS WORKED to create and manage a USB HFS drive. Just a little risky.
4). Use FAT32 USB format. Works if you set up guest access on the drive and connect via SMB. Supposedly but will need to test.
It’s grand KTJensen, used the macbook air to format the drives, all working perfectly.
The vendor PARAGON gave me a link to a newer version of their software PARAGON HFS+ for WIN7. The one version you buy and download from the web site, is not the same as the one you get when you ask a tech support question. Am still testing it to see if it will remain working. no trust yet. Also of note, that PARAGON has a free HFS partitioning software for WIN7. So do not fail to take advantage of that.
Confirmed - if you decide to use PARAGON HFS software for access to your formated USB HFS disk, please make sure you get the latest version from the tech support folks at Paragon. The one you download from their web site is not the latest version. You will have problems with your WIN7 system if you do not get the latest version. So be careful of that. The latest version number according to my registration is PSG-216-PEE-PL which it seems there is no way to tell from the installation process.
PARAGON also has a free PARTITION MANAGER software available on their web site, that will allow you to format a USB drive as HFS via a WIN7 computer. This is required for use with PARAGON HFS software. The free version is all you need.
Have now been using it for a couple days and all seems functional.