The media server is treating itself as the root source of the content. The Media server does not acknowledge that its data is at any particular IP address or network source. It simply reports a local path. The network location identification and communication is handled by a different process.
Therefore, your file paths within the M3U file will look like this:
If the M3U is located in the same directory as the files:
song1.mp3
song2.mp3
song3.mp3
If the M3U is located in the album folder (where we assume the folder structure is Genre/Artist/Album/files):
/album1/song1.mp3
/album1/song2.mp3
/album1/song3.mp3
If the M3U is located in the artist folder (where we assume the folder structure is Genre/Artist/Album/files):
/artist1/album1/song1.mp3
/artist1/album1/song2.mp3
/artist1/album1/song3.mp3
You can use this same logic to compensate for whatever folder structure you may have.