Our development team have checked with Realtek - there isn't any changes between the old and new SDK for the open source codes used by them.

Of course any changes to any of the source code for any of the other gpl programs would require a new gpl release for those programs.

Let alone patches to the kernel to handle squashfs......

Just to clear things up:
ACRyan has a few, critical proprietary programs/protocols that make up the heart of these media players.

The biggest pieces are: the audio firmware, the video firmware, the /usr/local/bin/DvdPlayer, the /usr/local/bin/RootApp, and the particular way they implement hdmi/composite output.

Those pieces are not open source. They are proprietary. No one is obligated to release the source code for these pieces and when they have done so it has been accidental.

If you release software based on GPL software, then automatically your software becomes GPL as well and you MUST make your source code available. Otherwise you are not allowed to make it in to one package, e.g. the firmware release. This is the most strict part in the GPL licenses.
So the statement: "Those pieces are not open source. They are proprietary. No one is obligated to release the source code for these pieces" is completely in contrary with the (very clear) legal parts of the GPL licenses.

The option to circumvent this, is to release your software as a (closed source) package and give the user the option to download the GPL parts and add it to the package (the firmware in this case).
Any other combination is illegal. You are not allowed to pack it in the same zip or on the same CD or in the same device.

So A.C.Ryan has 3 options:
- release their firmware as LGPL (as it is based on closed source, that's allowed)
- release their firmware as closed source with absolutely no GPL in it. The installer or the installed software (firmware) should then give the end user the option to download the GPL parts and install them.
- release their firmware as proprietary closed source and rewrite every part of the used GPL stuff themselves (and not copy or reverse engineer it) to make it an integral part of their firmware.

A 4th option could be that the GPL lawyers prosecute A.C.Ryan if they don't apply to one of the 3 options mentioned above.
I don't hope it comes that far as I'm afraid that will extremely slow down further progress in firmware versions.

And then there are the WDTV live, Eminent, the Asus O!Play and other players. How do they deal with GPL?

Having closed source third party software in your GPLed open source software is allowed. However, your software becomes than LGPL.
Having your own software as closed source and mixing it with GPLed software is not allowed.

I'd like to incorporate GPL-covered software in my proprietary system. Can I do this?
You cannot incorporate GPL-covered software in a proprietary system. The goal of the GPL is to grant everyone the freedom to copy, redistribute, understand, and modify a program. If you could incorporate GPL-covered software into a non-free system, it would have the effect of making the GPL-covered software non-free too.
A system incorporating a GPL-covered program is an extended version of that program. The GPL says that any extended version of the program must be released under the GPL if it is released at all. This is for two reasons: to make sure that users who get the software get the freedom they should have, and to encourage people to give back improvements that they make.

However, in many cases you can distribute the GPL-covered software alongside your proprietary system. To do this validly, you must make sure that the free and non-free programs communicate at arms length, that they are not combined in a way that would make them effectively a single program.

The difference between this and “incorporating” the GPL-covered software is partly a matter of substance and partly form. The substantive part is this: if the two programs are combined so that they become effectively two parts of one program, then you can't treat them as two separate programs. So the GPL has to cover the whole thing.

If the two programs remain well separated, like the compiler and the kernel, or like an editor and a shell, then you can treat them as two separate programs—but you have to do it properly. The issue is simply one of form: how you describe what you are doing. Why do we care about this? Because we want to make sure the users clearly understand the free status of the GPL-covered software in the collection.

If people were to distribute GPL-covered software calling it “part of” a system that users know is partly proprietary, users might be uncertain of their rights regarding the GPL-covered software. But if they know that what they have received is a free program plus another program, side by side, their rights will be clear.

I'm not sure if the firmware counts as a single software package. It uses many different components with different licenses, but is never combined into one software package, you have the video player, audio player, Bittorrent client, etc. which are all separate. Any changes Realtek or ACRyan makes to individual GPL licensed software libraries (like Busybox) should be published on their website. A company like Codeweavers, who distribute the proprietary Crossover based on Wine doesn't publish their Crossover source either, although Wine constitutes of 80% of their product. They do however publish all their modifications, which are very substantial, to the Wine sourcetree however.