Yes iTunes 7.7 has not prevented files being added correctly to it's Music Library. Simply made the LW's playlist incompatible with the main iTunes music library.

I've found iTunes 7.6 I think it is from memory (just shut that computer down) on my old G4 (dual osx boot) from OSX 10.3. It's not the installer but the program. Not sure if it will work simply replacing the iTunes 7.7 with the 7.6 version but worth a try (since many OSX programs include the support files within the actual program package). I will upload it & make the link available tomorrow.

Windows users reported success using either the Windows iTunes version 7.0 or 6 after uninstalling their iTunes 7.7
Unfortunately I cannot find a mac old versions installer web page so will upload myself for anybody interested.