If the problem exists when not displaying the file locally means that the machine in use is to slow to transcode and stream the file at the same time.
You may be able to transtcode an Mpeg source at low resolution using an MPEG-TS container without selecting an audio and or video format. I would try this locally without streaming the file and without displaying the file locally and see what happens.
If you are successful then try streaming the same source file with the same settings.
There is an option to reduce the resolution called "Scale", you could also try this if the original resolution proves to be a problem.
The object here is to separate transcoding from streaming when you experience problems, in order that you can figure out the options and conditions that are best suited to you, your equipment and connection.