Your CPU Duo Core is fine. I'm just worried about your 1 GB RAM, I recommend at least 2 or 4 GB of RAM and the speed of your RAM to be at least 667 Mhz or better. Your router is also fine, no need to upgrade it. I've been testing 1080p .mkv streams for the past few days and I'm not too thrilled about it. It stutters a lot and can't seem to find a way to get a smooth stream. I've tried downgrading my quality settings down to just *Good Quality* and it still stutters, I haven't tried going lower than that as I wouldn't even enjoy watching 1080p too downgraded so I didn't even bother. I'm using wired connection as well.
I will be testing it more, although I did successfully tested 720p .mkv files and they stream great with no stutters. I'm not sure if I'm getting both 720p and DTS coming through, I will have to double check my log on that when I get home. If you do plan to stream at least 720p through Media Server, I suggest it to be wired and not WiFi. WiFi is only good to stream audio and low end movie files/sizes. You can stream downloaded youtube movie files (High Quality or HD) through WiFi with no problems.
When it comes to DTS, my personal opinion is that if you don't have a Home Theater Sound System for your digital audio to stream through. There's no need for it, stereo sound is as good and it works fine for me. I'm just glad to have sound, lol. I'm still working on this 1080p stream thing. I will let you know if I get it working with no stutters. Another personal opinion is that with 720p and 1080p .mkv files, I can't really see a difference in picture quality when I run both on my computer screens anyway. Therefore I only have 720p files which are around 4.7 GB. Takes up less space on my 1 TB external.
*1080p stream testing completed*