I'm running into a little issue here. It adds the directory the .m3u file is located in at the beggining of every line. Nothing Notepad++ won't have fixed, but you might want to have that looked into.
That's how it was designed.
I keep my YAAP playlists in "D:\YAAP" (with YAAP itself), and my music in "D:\media\music". If I didn't put the directory in at the time, then YAAP would try to load (for instance) "D:\YAAP\05 - Self Deception.mp3" and get all confused (and do I-don't-know-what), because there's nothing to indicate this file exists in "D:\media\music\Lacuna Coil\Comalies" instead.
Now unless ViRUS changed YAAP's playlist format since I've been gone, this is still necessary in the case that playlist files are kept separate from music.