DLNA org say it's not their fault... because they are powerless fools
It really is as shit as all that. My experience is as stated above, DLNA renderers simply reject outright anything that is even slightly at variance from a very limited spec. Implementations of other formats than MPEG2, MP3, LPCM, and JPG are riddled with non-standard DLNA-PNs that cause the server vendors to have to handle every client differently.
I *DO* have TBs of MPEG2 on my home server (rips of all my hundreds of DVDs), and it is all served to my DLNA rendering TV, and it works (very well thank you very much). I do appreciate that I am a lone voice crying out of the wilderness on this one. One of the few with an entire library of DLNA compliant media. The reason for this? I am geeky enough to have got in on DLNA early and in the days before transcoding servers. I also didn't really have any downloaded videos (except Red vs Blue series 1-4 in avi), so I could build my library from scratch.
What the manufacturers behind DLNA and the DLNA.org seem to fail to appreciate is that mandating only MPEG2 video to get a compliance sticker is simply not going to wash with the general public. The majority out there want to see the mp4s that their phones have recorded and any number of other formats that they have created or acquired over the years, and they shouldn't have to jump through hoops because the device (which someone stated above can play the files locally) won't play that media type via DLNA.
One solution is to use a transcoding server, but this is only possible on servers that have some grunt available to them, i.e. a desktop PC. It is not possible on an always-on, low-power DLNA server on a NAS, i.e. the sort of device likely to be on when you want to watch your videos in bed.