There is no ready made built in M3U to XML converter in Mp3tag.
Maybe there are already numerous tools out in the world to solve such a standard task.
If you need Mp3tag to do this task, then you can load the files by the m3u playlist into Mp3tag and then use Mp3tag's export functionality to write a XML playlist.
See there as a starting point:
Export Configuration Archive
But ... why should iTunes not be able to read in a m3u file?
If so, then let iTunes do the conversion.
Make a new playlist in iTunes and drag the m3u file into.
Other people say: "Winamp has support for the iPod and can make an iPod playlist in Winamp."
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