There seems to be an issue with Firefox 220.127.116.11 and iTunes 7.6 on OS X with regards to M3U files. I've noticed this issue with eMusic as well. To solve this, I've included the URL of the actual streams, and if you enter that URL in Advanced --> Open Stream, that should work. There's also this script, but I haven't had a chance to try it yet.
I would be worried about the records getting ruined by a cheap stylus. A $35 system can't have all that great of a stylus. If you aren't playing anything precious it might not be that bad (you reference the thrift store) but I would be careful.