I found a very super easy work around. I used TweakUI to remap the My Music folder on my wifes PC to the external drive, the NAS. Itunes always wants to place the xml files in My Music but by using TweakUI I was able to go to "My Computer/Special Folders" and remap My Music onto the NAS. It works a treat, all the playlists appear and she has know idea things have changed. I'm now very happy :-)
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