Playlists and mp3 playback in general is one of the sore spots in XBMC, but progress is coming along, so hang in there.
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i came across this in another post but thought I could toss in my 2 cents -
I use MusicMatch (MM) to manage my MP3 files on my server/pc (over 11,000 tracks and growing!! and yes 95% are from my personal CD's that I owned at one time or another!) I us MM to build a playlist (really cool AutoDJ functions) then I edit the playlist file in notepad by changing the drive reference (ie - X:\MP3\Rush\Show of Hands to read smb://username:password@servername/shared MP3 foldername/Rush/Show of Hands and save the file with an _xbox.m3u ending. This file remains inthe Default folder under Playlists of MM. Then in XBMC I have added the following bookmarks
<bookmark>
<name>MusicMatch Playlists</name>
<path>smb://user:password@servername/default</path> (default is a sharename for the default playlist folder)
</bookmark>
<bookmark>
<name>Music (Server)</name>
<path>smb://user:password@servername/music</path> (music is a sharename for my MP3 files)
</bookmark>
Under XBMC/My Music the two bookmarks show up and the rest is smooth sailing - it kicks ass to show the thing off to my friends, plus you don't have to rebuild a playlist everytime you want to listen to a mix (ie - 24 hrs of Alternative/Classic Rock with some Metal mixed in). I even set XBMC to AutoShuffle each time it comes into a playlist. Anyway, hope this gives some people some ideas.