When you export the iTunes playlist... you need to modify the .m3u file to have relative references to the files... not absolute. So for me I put all of my artists in the top level directory of my SD card. Then I have to open the .m3u playlist file in a text editor and do a quick find a replace to change all of the references.
An example from my .m3u file was this:
E:\My Music\Dave Matthews Band\Big Whiskey & The GrooGrux King\05 Why I Am.mp3
However when the car reads this file... that E:\My Music\ directory doesn't exist. So I did a quick find for " E:\My Music\ " and replaced it with " .\ ". Assuming that you place your .m3u files in the top level directory like I did, this might fix your problem. So the above line after the fix should look like:
.\Dave Matthews Band\Big Whiskey & The GrooGrux King\05 Why I Am.mp3
Lastly, My SD Card structure looked like this:
SD CARD
- Playlist1.m3u
- Playlist2.m3u
- Artist 1(Directory)
- Artist 2(Directory)
- Dave Matthews Band (Directory)
Does that make sense? Regardless of your directory structure, just make sure the .m3u files are using relative paths and not absolute ones. Hopefully this fixes your problem. There was a program that someone else recommended that does this for you, but it's really not difficult to do by simply editing the .m3u file in a simple text editor and having some basic knowledge of absolute vs relative addressing.