This is how I create my playlists:

Connect the device to your computer vis the USB cable, once you can see the songs/folders you can either:

If you have the songs in folders, just right click on any folder and the "create a playlist option" automatically appears once you click it will automatically grab all the songs on that folder and create the playlist, just name it and that's it.

If you don't have the songs in folders then you just select the songs you want and do the same thing.

I don't even bother trying to create from the player itself, when I transfer the songs to the player from my computer I go ahead and create the playlist while I'm there, you need to connect it to the computer anyway, might as well kill two birds with one stone.

Hope this helps

Thanks!
Raul