Drew Fehrenbacher; apart from making some great extensions for YMP (trackseek, trackresume) has a working implementation of the playlist on his site.
I figured it was worth posting here as many people seem to have problems getting the playlist working.
In my case it turned out that in fact the syntax of my file was fine; it was the file itself that YMP balked at. (A xspf file that had worked fine with another media player)
Replacing it with drew's playlist worked great so eventually i just pasted the contents of my playlist over a copy of his.