Yes, the WDTV Live in addition to being a robust media player can also be used as a Network Attached Storage (NAS) device with some USB hard drives attached. In addition, if you add a USB hub a very large network storage system can be built by adding additional USB hard drives. For example, if you add an 8 port USB 2.0 hub with a one terrabyte USB drive on each of the 8 ports, then you would have a total of 8 terrabytes for your NAS.
What I have found is it works best with a single WDTV Live on the network because the default network address \\WDTVLIVE will only access the lowest IP address of multiple WDTV Lives. If you have more that one WDTV Lives on your LAN then the subsequent units will need to be accessed via their IP addresses. WD supplies a software package that will find all of the WDTV Live units on the network and make shortcuts for each. Also it it possible to navagate to folders off of the root on the hard drives attached to any WDTV Live and map them to being a network drive, adding password security if desired.
Take my installation with 2 WDTV Live units as an example. My first WDTV Live unit has a fixed IP address of 192.168.1.3 and the second WDTV Live unit has a fixed IP address of 192.168.1.6 as entered in the WDTV Live setup menu. For ease of discussion I’ll refer to these as the .3 unit and the .6 unit. Now when the network window is opened on a PC, the WDTVLIVE device will access hard drives connected to the .3 unit only. In order to access the hard drives attached to the .6 unit I have to enter \\192.168.1.6 in the address field.