Standart VLC supports m3u8, but your mod doesn't. Why?

Because VLCJ Url parser sucks and the WATERMeDIA URL Parser sucks too.
This issue was fixed in v2.1.x enhancing both parsers, but it requires dependent mods release a compatibility update (for the good sake)

WaterFrames and LittleFrames will have one soon, Videoplayer maybe no (Goedix is on vacations).