That is in fact what I use.
I simply rip the dvd's with DVD Shrink to a single VOB file, and stream them to my PS3 using that software. Since I keep the files on my local PC, I don't have to compress down to the FAT32 4GB limit.
That's pretty cool!
Now I'm thinking I might want to plug the external HDDs into the PC and use this SW to avoid the 4 GB limit as well. That's likely the only way to be able to deal with BluRay DVDs at this point.
Might be time to take a look at something like
this new Linksys media hub. Not on sale anywhere yet, but the capabilities look pretty slick. Looks like a NAS device, but you have the capability to access it remotely through the internet.