I have the same problem. I assume the solution is to set up a media server that is compatible with the PS3. I found a list of free software but haven't been able to get them to work yet. I'll keep trying. HDV is 25Mbps which isn't a lot. I'd think that 100Mbps Ethernet should work.
The internal HD should not have the 4GB limit, just USB drives you attach.
I did in the end solve the problem by using TwonkyMedia as a media server on the PC and a Cat 5 connection to the PS3. I have since digitised all my old home videos and also added a huge number of downloaded movies, ending with about 1500 GB on the PC. All my home movies, all my photos(jpegs, not Raws) and all my music are now instantly playable through the PS3. Great! The secret is to forego Windows Media Player and simply purchase the very cheap Twonky Media, available for a 30-day free trial.Highly recommended! Unfortunately the next catch was to play my downloaded movies. Only some 10% play through the PS3, for the rest I get file errors through the PS3. Practically all of these play on a PC using Quicktime. Again, Windows Media Player is not up to snuff. I suspect that the issues are to do with copy protection. Sony is particularly anal about this, Microsoft simply inept(?), but to progress we need a next-generation attitude. I have quit buying Blu Ray discs because of Region coding. Simply too much hassle, with Europe (my Region) being price gauged. I do not know when they will all get the message that all this copy protection/Region nonsense loses them more sells than protects anything. People will always find a way around. And as Michael keeps saying, downloading is the future.
Apparently downloaded movies have no problems playing through Apple TV, but that does not seem capable of playing 1080 home vides, so one has to retain the PS3 route for now. Currently I am debating whether, for my Quicktime-playable movies, I should simply hook up a cheap PC to the TV as a monitor or get a large PC monitor for my regular PC, until the software nonsense catches up with market forces. In the meantime I keep checking the playability with the PS3 each time I do a system update.