OK, I just figured this out.
The M3U playlists are simply text files - ordered lists of complete directory/filenames to play. Read and edit them with Notepad. (Start->Run->notepad)
The music files referenced in an M3U playlist have to be in the directories specified in the M3U playlist. So Step One is to make sure that's true. If not, move the music (MP3) files to the directories the M3U files say they're in. That may mean copying music files from your flash drive to the proper hard drive locations or editing the M3U playlist file (using notepad) to reflect the current locations of the music files. If the music is on your flash drive, edit the M3U file with the right drive\directory info for your flash drive.
Step Two is setting up Windows to recognize the M3U playlists and play them using MC. While in MC, click to Tools->Options->File Associations. Then check the Playlists/Audio Playlists checkbox. This tells Windows to open MC when you click on a M3U playlist file. (You may have to close MC and reboot after changing this setting.) Now that Windows knows what to do, simply 'open' the M3U file (double-click) and it will start up MC and put the listed music files into Playing Now. You can now save that playlist in MC normally.
Hope this is helpful.