Symptom
Your designated media directory or a subdirectory (folder) inside it appears to be a file in Streaming Server Admin. This prevents access to the contents of the folder, and you cannot add this content to the Playlist.
Figure 1 illustrates what you would see if the name of folder in the media directory contained an apostrophe:
Figure 1 "6 Gig o'Mostly Texas iTunes" appears as a file
Solution
Do not use the apostrophe or backslash characters in the name of any disk or folder that is your designated media directory in Streaming Server Admin or in any of its subfolders. Remove any of these that you find.
Many MP3 players, including iTunes, offer you the ability to automatically name your files and folders when encoding (or "ripping") music. This is done by downloading names from the Gracenote CDDB service. CDDB can use characters like the apostrophe, so you may find it in your Media Directory if you have used CDDB.
Because using an automatic service like CDDB is likely to save you more time than is required to remove apostrophes, the most efficient solution is to remove the apostrophes from the affected directories' names. When importing new music, be sure to watch for new apostrophes and to subsequently remove them.
This document may be updated as more information on this issue becomes available.