PLA format playlists (the kind WMP makes) go in the Playlists folder on you player. These can incorporate music from both the internal memory and external memory card.
M3U format playlists go in the Music folder (player or card) alongside your music. This format can only contain files from one source; either your internal memory or external card, but not both. So if your playlist is comprised of music from your internal memory, you would put the playlist file in the Music folder of your player. If it’s a playlist of music from your memory card, you would put that playlist file in the Music folder on your card.
I don’t know if there is a limit to the number of playlists, although there is a limit as to the number of tracks you can put in each playlist. On the Fuze, I believe it is 1,000 tracks.
Your complaint is not unique though, we’ve heard from several people over the years that have had the same problem. Music/playlists “synced” with WMP disappear from the memory card, leaving only the 1st one created.
I’m not sure there is an easy solution. I don’t have my Fuze anymore, but I use a 2-step process that works on my e200 series and Clip+ and Clip Zip players, so i assume it would also work on the Fuze. I create .m3u format playlists in Winamp. Since the music I tend to put in playlists generally happen to be spread between the 2 memory sources and I don’t feel like juggling them around, I then convert them to a .pla format (with a converter program) so the player will read the tracks from either the internal memory or the card.
Your mileage (and needs) may differ, but it works for me.