The whole ipod, usb stick and SD card system is a joke. I spent ages trying to make playlists and folders and here is what I learnt, others may have had a better experience.
1. Forget the ipod and usb stick.
2. Buy a very good quality SD card (I use a Sandisk extreme) This is important as I had problems with other cards.
3. Playlists have to be in .wma format but I could not get them to work.
What I did was just name a folder as a playlist and put all tracks inside that folder. I have about 10 folders (playlists) and about 10,000 tracks and it works fine.