After changing settings within iTunes, you'd need to press the Refresh button in the LW Library window so it shows any changes. But I don't know if the changes in iTunes will affect files already within its library. Perhaps only new ones. I've never used that setting so I can't verify.
BTW please don't post on the forums using caps locked. It looks like you're yelling at us. It's bad internet ettiquette. It's also more difficult to read!