Now that I have taken a long enough break from Oblivion to connect the 360 to the computer, I can play my mp3s but cant seem to get it to work right with .m3u playlists on the computer.
I didn't have any playlsts stored on the computer initially so I downloaded a freeware program and created a few. The 360 can see the playlists but says that it is empty of songs. The computer can play the playlists fine.