Folks,
This is how I resolved this. It appears that my "iTunes Music Library.xml" file had some invalid UTF-8 characters in the pathnames of some tracks. I had to use an XML validator and text editor to edit the Library.xml file. Hopefully Apple can add better error checking/handling into iTunes such that it automatically corrects this issue. My method of correcting this used some development tools and some may have a learning curve to use. It's worth it because you can save all your playlists and song ratings.
Here are the steps I took:
1. In iTunes, export your Library
File -> Library -> Export
I put it in ~/Desktop/Library.xml
2. I have "macports" installed. If you don't have it search for it and install it.
3. In Terminal.app
# sudo port install docbook-xml xmlcatmgr vim
4. Close iTunes
5. In ~/Music/iTunes
Create a directory called "bak"
Copy all *.xml and *.itl files into "bak" directory
6. Open up two Terminal.app shell windows
In the left shell, you will keep validating the XML file with "xmllint" looking for problems. In the right shell you will use "vim" to keep editing the XML until it is correct.
To validate the schema:
# xmllint --noout Library.xml
You should get some output like:
./iTunes Music Library.xml:398353: parser error : Input is not proper UTF-8, indicate encoding !
Bytes: 0xFF 0x30 0x3A 0x57
<key>Location</key><string>9V?0:W?1;X?/9V?-7T?,6S?1;X?3=Z?3=Z?1;X?0=Y?1>Z
^
./iTunes Music Library.xml:787054: error: xmlSAX2Characters: huge text node: out of memory
<key>Sample Rate</key><integer>48000</integer>
^
./iTunes Music Library.xml:787054: parser error : Extra content at the end of the document
<key>Sample Rate</key><integer>48000</integer>
As you can see, there is some characters in the <string> tag that do not conform. You only need to worry about the first error. Make note of the line #398353. Goto that line in your text editor ("vim" or whatever you chose that has Library.xml loaded).
7.
You should see the following XML which represents the track:
<key>XXXXXX</key>
<dict>
....
<key>Location</key><string>.... INVALID CHARS </string>
</dict>
Delete the entire track between <key> and </dict>. Save the file.
8. Recheck the XML file as described in Step 6
If you see errors, continue to Step 7 and resolve them.
If there are no more errors (no output) goto Step 9
9. Load up iTunes again
10. Import the *fixed* Library.xml file
File -> Library -> Import
11. Wait until the Library is imported. Your songs should be visable.
*** Note: iTunes is still reporting that some songs could not be imported "because the could not be found". It appears this accounts for about 5% of my original library. Not sure whats up here.
12. iTunes Artwork Screensaver now works!
I found that the non conformant UTF-8 characters were the root issue inside this thread:
https://discussions.apple.com/thread/2220397?start=0&tstart=0
Hope this helps everyone.