I have constant headaches with Windows Media Library sharing, which I'm using to share my video library (a whole lot of AVI files on my computer's hard drive) with the XBox 360. I have the whole setup working, so setup and basic configuration is not an issue.
The issue is that Windows Media Library frequently fails to notice additions and modifications to the "watched" folders. Not only that, but often after I've added something new to the library, it fails to transmit this new library information to the 360, as is demonstrated by the fact that, using that 360, I navigate to my video library and the new folders don't show up in the list. Often the only way to get the 360 to see the changes is to exit out of "Videos" on the 360, then remove all videos from Windows Media Library, go back into videos on the 360 to confirm that nothing is shared, then re-add a few videos (but not too many) in Windows Media Library, then go back into the videos in the 360.
The whole thing is a real pain in the bum and I really wish I could just add all my videos to Windows Media Library and have it keep watch without me having to kick it, and have the 360 pick up changes without me having to constantly rebuild the library.