@madhukannan
sorry for late reply. actually there is some renovation work going in my home. But I did installed the hts for few days. and here are the answers for your questions.
1) It plays all the formats including mkv & m2ts through usb hard drive. My hard drive is 250 gb & NTFS formatted. It played all full hd movies with surround sound. I haven't tried large capacity hard disks like 1-2 tb also I have to check whether it plays rmvb, flv etc formats. Also for more info on format compatibility, download spec sheet from Philips site. they have given detailed info on format compatibility. I noticed a problem but experienced it only in one movie. problem is that if you fast forward movie and then hit play, movie stops and you return to main menu. But overall very satisfied with format support and image quality. Actually I have usb port on tv too. But when I play full hd movie through tv's usb port, image quality looks average on the other hand when i play it through hts, I noticed a huge differance. contrast and color looks so good. I browsed through the menus to see if any post processing is happening, but there wasn't any.
2) Regarding network play, I don't know. I haven't tried it. But if you tell me how to check, I will check and reply. You can access flickr and youtube through it. At least it is mentioned in specs. I haven't tried that either.