I'm struggling with this problem as well. The "file://locahost/m:" prefix works for me. (All my music is on Linux machines and is made available by Samba to my last Windoze PC (which I must keep for iTunes).)
I noticed something else:
While testing, I used a playlist that was already in iTunes. That existing iTunes playlist is kept in a directory (Music) within the playlist area. Whenever I import a unchanged M3U playlist, the imported M3U playlist will silently be ignored and the existing iTunes list is 'used' instead. The imported M3U playlist will show up as an empty list...
This threw me off - I was thinking there was something wrong with the pathnames I tried.
It's actually OK - now I can just drag my 60 Music and 20 Speech playlists and iTunes will 'compare' them. The ones that turn out to be different will show up outside the existing directories (Music, Speech).
It would be nice(r) if the normal DOS style pathnames would be accepted again (m:\genre\artist\album\track.mp3).