The command I use in Linux is:
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cvlc -vvv bouquet.m3u --network-caching=4000 --extraintf="http" --http-port 8080 --sout-transcode-threads=4 --sout '#transcode{vcodec=h264,vb=500,scale=0.4,acodec=mp4a,ab=64,channels=2,samplerate=48000}:http{mux=ts,dst=:8002/}'
I have tried various playlist options, but none seem to work if the transcoding options are added. I have also tried loading the m3u playlist and saving it as an .xspf playlist. I have also tried different video/audio codecs, but the problem remains that it is trying to open the playlist as a media file rather than a playlist.