Is it possible, with an m3u playlist to add channels that link to a library of videos? I have tried already, but when I open the channels they don't play. I have no issue running the playlist in VLC.
No, M3U is for live streams only.
This is super fun to play with and does what you are asking for. You have to have Plex to implement, but can use the m3u and XML from the applet as a custom channel in Channels: https://github.com/vexorian/dizquetv
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