I eventually solved this problem.
Installing Tvheadend from SyncCommunity also installs ffmpeg from SynoCommunity.
However, the m3u8 IPTV file needs to be configured to use ffmpeg from SynoCommunity and not default to using the built-in Synology ffmeg.
For example, using one of Matt Huisman's m3u8 files:
Install nano from SynoCommunity.
ssh into Synology.
sudo -i
cd /usr/bin
wget http://i.mjh.nz/nz/tvh-tv.m3u8
nano /usr/bin/tvh-tv.m3u8
Use nano to change each instance of "ffmpeg" to "/usr/local/ffmpeg/bin/ffmpeg"
Install and connect to Tvheadend
Configure IPTV Automatic Network
File has been modified so need local file instead of http
URL: file:///usr/bin/tvh-tv.m3u8