Sounds more like the formatting of your playlist file (i.e. path references, etc.) might not be quite right. Can you post the first few entries from the playlist you made externally?
#EXTM3U
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\07 Greenbriar Boys - Hit Parade of Love.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\02 Hedy West - Shady Grove.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\14 Smoke Dawson - Devil's Dream.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\10 Tom Paxton - Morning Again.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 2]\02 Jerry Jeff Walker - Mr. Bojangles.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\01 Guy Carawan - Intro by Lena Spencer-Cripple Creek.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\08 Mike Seeger - O Death.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\04 Frank Wakefield and Friends - Will the Circle Be Unbroken.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\12 Patrick Sky - Reality Is Bad Enough.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 3]\16 Lena Spencer - Dear Little Cafe.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\03 Sleepy John Estes - Intro by Lena Spencer-Holy Spirit.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 1]\15 Utah Phillips - The Green Rolling Hills of West Virginia.flac
Music\Various Artists - Live at Caffè Lena- Music from America's Legendary Coffeehouse (1967-2013) [Disc 2]\01 Dave Van Ronk - Intro by Lena Spencer-Gaslight Rag.flac
The album title is tagged as "Live at Caffè Lena: Music from America's Legendary Coffeehouse (1967-2013) [Disc #]" (However, the ":" is replaced by "-" in the path/folder). At first I thought it was an issue with the ":" and "-", but I have another playlist with that and it works fine. I also want to point out that I have Mediamonkey, but when I create a playlist the way you suggested in this thread it leaves out letters and at least half of the tracks are missing the "Various Artists - ". This is pretty confusing.