Will jailbreaking my ATV2 and installing this software allow me to play MKV files with DTS audio (passed through to amp) directly from my Time Capsule?
Yep, works for me.
I even have a external usb drive connected to the TC and play movies trough media player. Sometimes a little stuttering but that depends on how large the file is.
Does the stuttering only happen when using the external drive? Or does it occur on both?
Only with the external HD for me. The TC plays great.