I have a Linkstation Mini, but I imagine you are having the same problem I had. In July, I think, Sony upgraded the PS3 firmware to 2.41, which changed the DLNA client ID from "Playstation3" to "Playstation 3" (with a space). This means that for a DLNA server to talk to support the full range of video formats recognized by the PS3, the DLNA server needs to be updated to recognize the new client ID. Unfortunately, without a firmware update from Buffalo, this is not easy.
Here is a thread that gives more background on the issue:
http://www.twonkyforum.com/viewtopic.php?f=18&t=5307
I was able to get my linkstation mini to stream videos to my PS3, but it was quite an involved, technical process, using third-party tools and probably voiding my warranty. Also, there was the very real risk of losing all my data and possibly destroying the linkstation, so be warned. I can't give a full walkthrough, but I can give you all the pieces you need to know if you are daring and have some familiarity with linux.
First, I used acp_commander to telnet to the linkstation.
I found the twonky resources directory on the linkstation (I logged in as root and use ls and cd to get to the directory) and found a file called client.db. I made a backup copy of this file and then used vi to edit it. I scrolled down to "Playstation3" and inserted a space. Then I saved the file and exited.
Next, I found the client.data file - this has some kind of cached client data. I renamed it to a backup file, to force the linkstation to rerecognize the PS3.
Then I logged out, turned off both the PS3 and the linkstation, and then turned them both back on. I think I had to go to the web configuration page for the linkstation and tell it to allow the PS3 or something, and made the PS3 search again.
After all that, I could stream divx movies from the linkstation to the PS3.
As I said, this is not a full walkthrough. I trust that if you are technically capable enough to judge your risk and figure out the rest, you should be able to find acp_commander, read help files to figure out how to telnet into the linkstation using it, and figure out how to edit files in linux with vi. And of course, there is the very real possibility that a mistake will make the linkstation inoperable.