I am having success creating m3u playlists on my Clip Sport with music files arranged in multiple subfolders using VLC Media Player. http://get.videolan.org/vlc/2.2.1/win32/vlc-2.2.1-win32.exe
First, I use Win File Explorer to create subfolders on my Clip Sport (internal memory or external card) under Music.
Then I copy my selected mp3 files from my HD into the various Music subfolders on my Clip Sport
Then I use VLC Media Player to load the mp3 files on my player into the VLC playlist window.
Then I use "Media -> Save Playlist to file -.> Save as “abc123.m3u” and save the new playlist in any one of the Music subfolders on my player. Then I can use Music mode or Card mode on my Clip Sport to select the playlist and listen to music files across all the subfolders.
See this link for some helpful screen captures
