I just created an M3U playlist as follows for a test and it is working no problem. I created 3 folders in the music folder for this test i used folders 1, 2, and 3 each containing one song that is in the playlist along with other songs that are not and the m3u playlist is in the root of the music folder.
can you give this a try and let us know if it works for you.
the m3u playlist looks exactly like this
#EXTM3U
1\25 to life.mp3
2\almost famous.mp3
3\cold wind blows.mp3
