I had the same problem as yours. Whenever I try to play a song or a playlist, my browser downloads a .m3u file to disk. After a lot of struggling with the configuration, I finally found a solution. Here's how I solved it.
The kplaylist bundle zip file doesn't contain xspf player in its archive. So I downloaded it from their site and extracted its contents into xspf directory inside kplaylist root directory.
and changed kpconfig.php file contents as shown below.
<?php
// this is a kpconfig meant for the "kPlaylist 1.8 bundle edition"
$cfg['laststreamscount'] = 12;
//xspf configuration that solves this issue.
$cfg['xspf_url'] = 'xspf/xspf_player.swf';
$cfg['xspf_enable'] = true;
$cfg['window_x'] = 420;
$cfg['window_y'] = 220;
$cfg['enablegetid3'] = 1;
$cfg['getid3include'] = 'getid3/getid3/getid3.php';
$cfg['livestreamajax'] = true;
// JW: edit this to suit your setup
$cfg['jw_urls'] =
array(
'swf' => 'mediaplayer-3-16/mediaplayer.swf',
'js' => 'mediaplayer-3-16/swfobject.js'
);
// enable jw player? Make sure the URLs above works.
$cfg['jw_enable'] = true;
$bundleconfig = array(
'shoutbox' => 1,
'ajaxurl' => 'prototype.js'
);
$cfg['jw6_url'] = 'jwplayer/jwplayer.js';
$cfg['jw6_enable'] = true;
?>
Finally, open up your kplaylist webpage>>go to options>>set playlist option to xspf.
That's it. If there is any better way to do it, then let me know. Happy listening :)