ok... this is probably why you were having problems with the playlists... im guessing you don't have "show file extensions" turned on in windows. Go do that now! It was retarded of m$ to hide file extensions, it shouldn't be an option in my opinion. Now that that's done you will see that it's called intro.mpeg.... not mpg or mpg2 Actually in xp it can be any format, it just has to be named intro.mpeg.....
If file extensions are turned off in windows and you try to rename something to intro.mpeg it's going to end up as intro.mpeg.avi or whatever the original extension is. In other words there is a good chance that your playlists are called background.m3u.pl