Shonk thank you so much for chiming in. I can confirm without a doubt the issue was not the squeeze. The setting was disabled in the gui when using 1.60 mod1. To check the situation, I put your FW back on and guess what, it's working fine now. Unbelievable. So issue resolved but the cause is still a mystery. Although the only thing I did was install your FW again, I must say that I wouldn't have installed it again had you not replied. So you fixed it!!! and you have made my life better by keeping the media receiver client settings persistent.
FYI Here's the order of my FW loads
1.5x? stock (prior version, ran it for months)
1.60 mod1 (extremely unusable while dlna enabled, was very hard to even disable it due to extreme slowdown)
1.60 mod by me (bunk due to broken gui access)
1.60 stock, opened using ACP commands (fine, but stuck trying to modify twonky to save client settings between boots)
1.60 mod1 (working fine now- very strange)
Maybe the FW simply needed re-install. And maybe related to what's affected the people in this thread. viewtopic.php?f=71&t=25897
Maybe my HD space was too low during the initial 1.60 mod1 install. Total speculation, but it was nearly full- like 99.8%
Maybe it had something to do with media feed settings. I noticed with my initial 1.60 mod1 install that many of the boxes were checked (like all the handpicked radio). I had unchecked all of them at the time and rebooted, but that didn't stop the problem. Now, after installing 1.60 mod1 this second time, I see the check boxes are all unchecked by default. The LS clearly is using settings saved from the prior install.
The clue to the slowdown problem was in seeing twonky config showing that it's processing mediafusion-integration-service.import.log. When the slowdown problem (understatement) existed, the processing of this file would go on 6-8 hours and then finally stop long enough to allow telnet, gui access, etc. Then it would start up again right away and keep going another 6-8 hours, making the unit totally useless. Really curious what it was doing.
I have just enabled squeezbox and confirm it is working as expected. Yes, the box is a little slower but it's not doing anything what it was the first time around. It was so bad before that telnet wouldn't even respond with an initial login prompt when that file was being processed. Hey maybe I'll get a squeezbox now!
I really don't want to mess with it anymore but if I learn how to make this problem happen I'll report it. What a hell of a time.