Instructions
Press the silver "Guide" button on the front of your Xbox 360 controller.
Select "Media," then "Music Library."
Select the location of your music, such as "Hard Drive."
Select a song from the list you have on the selected location. Select "Add To Current Playlist."
Continue to add songs to your playlist by repeating the previous step.
Select "Edit or Save Playlist," then "Save Playlist."
Enter a name for your playlist. Now it is saved and is accessible under "Saved Playlists" within the "Music Library" entry on your main menu.