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Ok, Ive been doing some research. The Now Playing playlist is a temporary playlist that includes all music that you queue.
You cant create permanent playlists within WMP PPC, you can only sync the playlist from a desktop/laptop to the PPC. Supposedly you sync the PPC to your desktop (via Activesync), then go into WMP10 or later on the desktop (previous versions will not work!), there is then a Sync feature that allows you to copy audio/video/playlists from the desktop to the PPC.
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