I can't imagine it's due to size. I have 40-50mb MP3 podcasts that Google Music picks up. Are your files significantly bigger than that?
Really not sure, sorry. It should automatically pick up all of the music files on your device. Have you tried moving a "normal" MP3 (i.e. a song not converted from YouTube) onto your phone?
You could try uninstalling Google Music and then re-installing it from the market.