Okay, I'll put out v195 with the underscores for iTunes, and proper %xx for everyone else.
Mark,
I just got around to retesting this with iTunes 3 (new since this thread was last discussed), and it no longer has this problem. To be more specific, it properly handles url encoding of spaces and the like without displaying the string literally like it used to.
I'd like to officially request that this Hijack feature be removed, as iTunes will now work properly with the same m3u as other programs. I'm sure it's probably nice to remove special case code like this, anyway.