How does one parse and rewrite a m3u to included the extended tags. How do you predict a movie over a tv show ?
The M3U is just a plain text file. I edit mine in vi, but you're welcome to use Notepad or whatever.
However, classification for movies comes from the guide data in the XMLTV file. That is wholly separate from the M3U playlist.
Sorry I was meaning the EPG. How does somebody make a script to parse the EPG file to add extended tags that point to art work and to make it either a movie or tv show???
It depends upon the language you want to use, or tools. The file is XML, so you'll need a tool to parse that.
A better option would be to find a guide provider that correctly supplies the additional metadata in the first place. But if you're curious, here's the XMLTV spec:
that spec is insane 
I tried to create a tool that does what OP is saying but I gave up for a while at least.
Matching content as show or movie would require lot of cross checking IMDB or other database unless you come up with easy solution e.g. whatewer do not have season information is a movie.