Well after much trial and error I have got this resolved.
The issue is that the LinkTheater or LinkStation (Not sure really which one is responsible for filtering out bad playlists) requires the playlist to be in a certain format.
When you save a playlist from Winamp it saves the playlist in this format.
#EXTM3U
#EXTINF:231,The White Stripes - Seven Nation Army
\MP3\The White Stripes\Elephant\01 - Seven Nation Army.mp3
#EXTINF:183,The White Stripes - Black Math
\MP3\The White Stripes\Elephant\02 - Black Math.mp3
The #EXTM3U information is extended info that the playlist can use to display information about the song without actually having to go and inspect the m3u tag of the song. Sooo what I did was delete any line that had #EXTM3U or #EXTINF in it. So now I have a file that has only:
\MP3\The White Stripes\Elephant\01 - Seven Nation Army.mp3
\MP3\The White Stripes\Elephant\02 - Black Math.mp3
I can now refresh on the Linkstation Media server and my playlists show up.
They behave kind of wonky. If you press play on the playlist itself it will begin playing all the songs and you can skip and go back like a regular album. However if you go into a playlist, and play a song, it will not let you skip, it will just not do anything else once the song is done playing. Not sure if this is proper behavior but /shrug I am just happy that I am able to save music to the darn thing.
I have had the best luck with winamp creating the playlists, but I have to manually go through and delete the lines. You need to save it as an m3u playlist then go through the manual pain in the butt of removing the lines. I am looking into finding something that will remove them, or heck I may just write something myself.
Hope this helps anyone else out there with the same issue.
Developers!!! I have a feature request. Please let me pick a default playlist to start playing once I turn on the box. I have this set up to a dual room receiver and would like the ability to turn on the dual room feature, start the LinkTheater and just have it start playing songs. Thanks.
Hope this helps,
Clint