I also have a USB harddrive on port2 and am using the nightlies.
I found that the default parms and documentation were not right for my setup.
1. The mp3_dir location needs to be
/…/flash/.. and not /…/hdd/..
– this solved the bad mp3 dir problem for me.
2. the syntax of the logfile parm
should be logfile = whereever
– the missing = sign was the cause of bad .conf file message for me
I think it would help to update the sample/default mt-daapd.conf file.