In your playlist, are the folder listed as part of the path to the file? For example this is a playlist I have (this is in m3u format):
#EXTM3U
#EXTINF:163,Melissa Etheridge - Come to My Window [Live]
Various Artists\The Concert for New York City Disc 2\05 Come to My Window [Live].wma
#EXTINF:309,Melissa Etheridge - Born to Run
Various Artists\The Concert for New York City Disc 2\06 Born to Run.wma
#EXTINF:216,Melissa Etheridge - Refugee [#]
Melissa Etheridge\Greatest Hits- The Road Less Traveled\01 Refugee [#].wma
#EXTINF:288,Melissa Etheridge - Similar Features
Melissa Etheridge\Greatest Hits- The Road Less Traveled\02 Similar Features.wma
#EXTINF:326,Melissa Etheridge - Like the Way I Do
Melissa Etheridge\Greatest Hits- The Road Less Traveled\03 Like the Way I Do.wma
#EXTINF:234,Melissa Etheridge - Bring Me Some Water
Melissa Etheridge\Greatest Hits- The Road Less Traveled\04 Bring Me Some Water.wma
#EXTINF:198,Melissa Etheridge - You Can Sleep While I Drive
Melissa Etheridge\Greatest Hits- The Road Less Traveled\05 You Can Sleep While I Drive.wma
#EXTINF:276,Melissa Etheridge - No Souvenirs
Melissa Etheridge\Greatest Hits- The Road Less Traveled\06 No Souvenirs.wma
#EXTINF:265,Melissa Etheridge - Ain’t It Heavy
Melissa Etheridge\Greatest Hits- The Road Less Traveled\07 Ain’t It Heavy.wma
#EXTINF:256,Melissa Etheridge - I’m the Only One
Melissa Etheridge\Greatest Hits- The Road Less Traveled\08 I’m the Only One.wma
#EXTINF:216,Melissa Etheridge - Come to My Window
Melissa Etheridge\Greatest Hits- The Road Less Traveled\09 Come to My Window.wma
#EXTINF:236,Melissa Etheridge - If I Wanted To
Melissa Etheridge\Greatest Hits- The Road Less Traveled\10 If I Wanted To.wma
#EXTINF:328,Melissa Etheridge - I Want to Come Over
Melissa Etheridge\Greatest Hits- The Road Less Traveled\11 I Want to Come Over.wma
#EXTINF:279,Melissa Etheridge - Angels Would Fall
Melissa Etheridge\Greatest Hits- The Road Less Traveled\12 Angels Would Fall.wma
#EXTINF:240,Melissa Etheridge - Lucky
Melissa Etheridge\Greatest Hits- The Road Less Traveled\13 Lucky.wma
#EXTINF:261,Melissa Etheridge - Christmas in America [#]
Melissa Etheridge\Greatest Hits- The Road Less Traveled\14 Christmas in America [#].wma
#EXTINF:264,Melissa Etheridge - Piece of My Heart [#]
Melissa Etheridge\Greatest Hits- The Road Less Traveled\15 Piece of My Heart [#].wma
#EXTINF:215,Melissa Etheridge - This Is Not Goodbye [#]
Melissa Etheridge\Greatest Hits- The Road Less Traveled\16 This Is Not Goodbye [#].wma
#EXTINF:261,Melissa Etheridge - I Run for Life [#]
Melissa Etheridge\Greatest Hits- The Road Less Traveled\17 I Run for Life [#].wma
EricB