If you pick that playlist (ie the Album level) then the content should be played in order (barring Shuffle being ON). You may want to make sure you're track names on the PC sorts alphabetically in proper track order (for instance, prepend the padded track_no to the name) in order to simplify things. If you pick a higher level, for instance Artist, then you should get the tracks within an album in order, and album after album played (again, depending on the Shuffle setting)

If you drag and drop your entire hierarchy at once, I'd leave out the m3u files, it at least used to lead to doubles - not so sure nowadays, was a long time since I did a large sync...

Oh yeah, if you haven't already - read through the excellent FAQ