Ok, I was thinking about this before I formatted, and I'm still thinking about it - has anyone else here that has experienced the "music settings BSOD" copied over whole folders of music instead of importing music directly? I just used the "copy multiple folders" option and pretty much right after I uploaded a second batch of music the problem went off.
Maybe the PS3 cannot handle M3U files and it's copying it over anyway? I'm going to upload these folders again with just .mp3's and nothing else to see if anything new happens. I'll update you guys if it goes BSOD again. If not, I have a bit more experimentation to do.
Edit: I took out all of the .m3u and extra files and I didn't get the error I was getting before. From what I understand right now the whole thing might have been caused by uploading total folders with all of the extra files over. I have no idea why it would screw with the "audio playback" menu since the only thing in there has to do with crossfade and CD importing though.
Here are the things I've done with Audio:
1) Uploaded about 700 megs of music (Total folders, jpegs, m3u's, nfo's and all....not sure if PS3 copies those over, but I think so)
2) Ripped a CD for demonstration purposes and cancelled before the finish.
Maybe if we can figure out something we've all done we can narrow down this problem. I can say I haven't messed with the firmware at all or tried to install Linux.