I'm really interested in this too, honestly here I have never seen an iOS app that did it without jailbreaking and going down the XBMC route, which allowed me to stream from a USB NAS drive hooked up via my Airport Extreme Router directly to my iPhone / iPad without a PC acting as a server.
Since updating to a newer iPad I switched to Airvideo, which sadly meant I needed the PC left on to act as a server, but at least it wasn't as clunky as WMC... I still shudder to remember the pain caused by trying to sync my 360 as an Extender...
If there's an XBMC style app for WP7.5 I will be incredibly happy, if not then Airvideo style would also be ace... If I have to actually convert and load the videos over though... I think I'll stick to the iPad