You were never able to create hierarchical playlists from M3Us, only add tracks that were linked by M3Us.

To create hierarchical playlist trees, you do this. If you want to do a really big synch where you make sure all the tunes on the car player are updated, you do this, but it takes some planning and forethought.

Note that I recommend turning off the import M3U/Shortcuts features because if you're not careful it can cause this problem.