I'm having similar issues. DLNA on the X seems geared more towards sharing media than playing remote media. Here's my setup:
PlayOn DLNA server that streams Hulu, etc. to DLNA-enabled devices and also streams local files.
Orb streams video over the Internet to devices and has a local DLNA server.
Tversity as a failsafe fallback for streaming local files.
All running on a dedicated XP machine that can stream to an XBox 360 or to XMBC running on a PC.
Orb works fine on the X
using their application over the Internet but the DLNA server just shows "The media file cannot be played." when I try to play a video file. PlayOn and Tversity show the same message. Media file type seems irrelevant, an MP4 that plays just fine on the phone itself won't stream and in theory the servers should transcode as needed (as Orb does over the Internet). I've tried various flavors of AVIs, WMVs, and the trusty MP4 format to no avail. Sometimes if I manually click the "Play" button I get a "Loading" message followed by the vaguely amusing "Sorry, an internal error happened. The media file cannot be streaming played."
MP3s seem to work fine, but with Slacker I'm less prone to listening to my own collection. There is no difference whether I play via HDMI or on the phone itself. I can see all of the DLNA servers, I can browse the directory structure, and the error message happens pretty much instantly so it's not likely to be a timeout.
Anyone with any ideas?