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In looking closer at it I realized that while there is indeed a iTuneslibrary.xml file in the folder I was pointing to, it appears that when I recently updated iTunes to the latest version, it seemed to abandon that xml file and created a new one back in the My Music/iTunes folder which had previously not existed. So basically it was properly syncing to the xml file…..just the wrong one.

Thanks for your help on this…….is that known issue with iTunes upgrades? I have moved my music outside of the traditional My Music folder structure and I guess iTunes automatically overrides it?