Here is the data from WinAmp and Windows Media Player:

WinAmp with khttpd_files=0 or 1:
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/Dio_-_The_Last_In_Line.m3u?FID=45d1&EXT=.m3u"
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/Dio%20%2D%20The%20Last%20In%20Line.m3u?FID=45d0&EXT=.mp3"
Outcome: Song starts playing as expected.

WMP with khttpd_files=0:
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/Dio_-_The_Last_In_Line.m3u?FID=45d1&EXT=.m3u"
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/Dio%20%2D%20The%20Last%20In%20Line.m3u?FID=45d0&EXT=.mp3"
Then WMP Popups up this error message:
"The server is refusing to fulfill the requested operation."

WMP with khttpd_file=1:
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/Dio_-_The_Last_In_Line.m3u?FID=45d1&EXT=.m3u"
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/Dio%20%2D%20The%20Last%20In%20Line.m3u?FID=45d0&EXT=.mp3"
<about a 30 second or so delay here>
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/ID3"
khttpd: open(/ID3) failed, rc=-2
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/"
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/TRCK"
khttpd: open(/TRCK) failed, rc=-2
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/2TCON"
khttpd: open(/2TCON) failed, rc=-2
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/RockTIT2"
khttpd: open(/RockTIT2) failed, rc=-2
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/The%20Last%20In%20LineTALB"
khttpd: open(/The Last In LineTALB) failed, rc=-2
khttpd: 192.168.1.5 connection from 192.168.1.8
khttpd: GET "/The%20Last%20In%20LineTPE1"

Please let me know if I can get any more data for you. Thank you for your time Mark.

-Allistah