As the previous poster already said, you could not directly convert a text file into a music file. Basically because text is not music ;-)
But you can use the .m3u file to find the actual music files.
Simply open it with a text editor and you will see for each title in the m3u playlist, where the actual sound file is located.
e. g. c:\my files\music\example.mp3
Then you can go there and do whatever you want with the mp3-files.
Please note: a .m3u file can not only be a playlist of mp3 files, but of course can contain other soundfile-types as well (wav, ogg, wma, etc.) If you can convert these into mp3s is another question.
For example: A copyright protected .wma file will not allow to be converted into an copyright free mp3 file (e. g. wma files you download from Napster).
So if you can convert the actual sound files into another sound format, depends on the type of files you find indexed in the m3u file.