Dudes, I do know the PS3 doesn't support NTFS. I can split the 8GB file into two parts before copying to the USB drive. I mentioned 8GB to give you an idea of the video bitrate.
Now, USB 2.0 has a practical transfer rate of 40MBps (or 320 Mbps). I wanted to know if this transfer rate was good enough for hi-def video watching. Apparently, going by your experiences, it's good enough.
I have watched Blu Ray Rips (over 5 GB in size) in this fashion with no stutter at all. However I will tell you the downside of this as well. Lets say if you want to watch this Blu Ray file from the halfway point. Then it is not really easy to search scenes over this streaming connection. I find the best performance is achieved when you copy the file over to your PS3 itself. But you can definitely watch Blu Ray rips straight off your PC or laptop or external hard disk if you are watching it in one go.
I have tried TVersity and Windows Media server for wireless streaming of videos. Haven't tried PS3MediaServer yet. What kinda router do you have ? I have the Airtel Broadband router and I do get stutter quite often when playing 2.2Gb(50 mins length) files. And I actually am able to rewind and fast forward at 120x for these files.
Yesterday, I streamed a 2 hour, 2.5GB movie (with no stutter) from my desktop to my laptop, then played the movie on the TV through the laptop's HDMI out and used the AirMouse app on the Ipod touch as a wireless mouse to control the movie!

( All this because the PS3 said the dreaded 'Unsupported Data' when I tried to play the movie. ) I can do the same for all my movies if not for the stutter.
And btw, the PS3 has a proprietary HDD format, so files of ANY size can be copied to the PS3, through wifi. But copying via wifi takes about 25 mins for 2GB files, so it'll be quite a wait for 8GB files.
I'm starting to think that upgrading my PS3's harddrive is a better option than buying an external HDD.