Okay two things 1) .m4a files do work, as in they appear to play fine.
2) Something is corrupting the sd card. I can read and write it on a PC or Mac. I use it in the player, and then I can only read it on a PC, and a chkdsk reveals that there are multiply allocated clusters. So we appear to have a software issue with the file system code. (This is going to be fun to find, but people should beware something is corrupting the Fat-16 filesystem. I have not tracked this down to see if record is what does it, or something else.
@icing, I tried your hold in the play while powering up, and this is too klunky and hard to get right for me. A knob is an interesting idea, but the first add for me is going to be a display.