The AllShare option is for Allshare enabled devices. At this point, I don't believe that will work, particularly with AAC files. It may work with mp3 devices, but you'll need to connect to the device.

The USB port would give you a better chance of working. That said, if the iPod has additional updates installed since the release of the TVs, that additional DRM measure may prohibit certain functionality or playback.

There isn't a way of showing photos while music is playing.