Hi,
The perception that cheaper NAS can't handle the processing requirement of DLNA server is not true at all. The Dlink DNS-320L has a 1Ghz processor which is more than enough to stream 1080p movies without any problem. I'm using a earlier model DNS-320 (800Mhz processor), it also can handle 1080p streaming without any issue at all. However, I don't quite like the stock software that comes with it, hence I loaded extra software from http://nas-tweaks.net/, and I'm using minidlna to become the DLNA server. I've about 1 TB of movies served out by minidlna to my Samsung 40" DLNA client/renderer. Read more and backup before you do anything with your stock NAS, please don't come and look for me if you screwed up your NAS after tweaking stuffs. I screwed up many times before getting it right.

Yes, you are correct. You will need some fundamental linux skills to understand the steps but it is not difficult.

No, not true at all as I've mentioned above.