Addressing your question first, yes, you are wasting your time if trying to get your iTunes generated playlist file to present its content within mt-daapd when using 0.2.3. The current stable release (in this instance defined as 0.2.3) does not have the ability to make use of the iTunes generated XML file. Its support of playlists is limited to mt-daapd.playlist and .m3u files containing explicit path data.
So, 0.2.3 is not an option if you wish to use your iTunes playlists and that should cover your question and your first “main issue”.
I am a little lost on the specifics of your second “main issue”. Do you mean to say that the SoundBridge times out when trying to access/browse the mt-daapd share or that this occurs when making use of a playlist?
If you are referring to a general sluggishness, this is a recognized issue with the most recent nightlies tarballs and itsy packages. The last couple of posts to this thread touch on the issue. My experience has been that library pulls went from a load time of less than a minute to something approximating five minutes. Ron mentioned that he thinks it has something to do with the new playlist stuff and will work on a fix shortly. If you cannot wait, you may consider going back a nightly or two and see if your performance improves.
–Herman