Here's the current facts regarding playlists on the X7:
1. Path names need to be defined using front-slashes rather than back-slashes (following Linux convention, unlike other X players
)
2. As CH23 noted, /mnt/external_sd/ is the path to the micro SD card. /mnt/internal_sd/ is the path to the internal storage. But if you place the m3u file in the root of the same storage as your songs (e.g. root directory of external SD, for songs on the external SD), you may omit this altogether.
So this guide still mostly applies
http://www.head-fi.org/t/761295/how-to-create-m3u-playlists-for-use-on-the-x1-x3-and-x5-from-your-computer
with the exception that you don't need to add #EXTM3U to the top of each playlist, but do need to find and replace all "\" generated by foobar with "/" .