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Will the My Book Live allow me to time machine 2 macs, and also share/host an iTunes library (or at least host my video files for playback on ps3/360)?
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You should be able to without any issues, though you may want to partition the drive for the Time Machine backups.
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Don't bother partitioning. The drive will backup two (or probably more) TimeMachine backups right out of the box. Have done this myself. Works great.
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