Finally I found a solution that that works perfectly with Playon and N900

When I use MediaBox and change the MPEG video to MPlayer in Player Backends setting I can stream videos fine. However, it seem that you need to overclock the N900 to minimum of 805MHz to have smooth playback. (Mine runs at 900MHz so it is not an issue for me.)

Finally I can now put the Playon into full use I purchased some time ago.