you have to enable process_m3u in your mt-daapd.conf file.
which should reside in /etc/mt-daapd/mt-daapd.conf or /opt/etc/mt-daapd/
you get the idea.
are you sure you know about playlist files ?
m3u playlist files contain the filenames and a full or realtive path to EACH music file.
if you want to create a smart (xml-style) playlist, Im sure theres plenty of docs on their syntax on the web. :unsure: