If you enter a relative path in the m3u file, Dolphin is supposed to treat it as relative to the directory where the m3u file is. But maybe there is a bug...
If you specify the path to the m3u file as an absolute path instead of a relative path (when specifying the m3u file on the command line), do relative paths in the m3u file work as expected? If not, could you upload the m3u file and show exactly what you're typing on the command line?
If you specify the path to the m3u file as an absolute path instead of a relative path (when specifying the m3u file on the command line), do relative paths in the m3u file work as expected? If not, could you upload the m3u file and show exactly what you're typing on the command line?

