Tony, good to know you got it working.I think Media Player encodes the file name or path inside the playlist and uses that for reference rather than the visible file name and location shown in the folder.That would mean if a playlist is renamed or moved via drag and drop then Media Player doesn't see it.
Holllywood, the music1.uhp was an altered version to work with Tony's folder structure,so you would need to edit it to match the path to your playlist folder although I guess you've done that as it did open Media Player and tried to play a file. Sorry, I don't know why you are getting that error message as I can't reproduce it.Do all the videos on your playlist work in WMP10 as some I had will no longer play and cause an error message since Microsoft released a patch for it.
Seduar, nice link,thanks for that.