I did finally get an answer last night, but there was really no more information that what I had already posted here. Below is what was provided to me from our HQ team. As you can see, not much clarification on playlists since 1.10 firmware. I again asked for more info. I will stay on top of them.
After Firmware version 1.10, the method of using the playlist function was changed due to the Open APP service.
The reasons for the change is some Music App create playlist file(.m3u) and it confuses the AK product.
So The conclusions is below.
playlist function
before
playlist file(.m3u)
It worked in any folder
After
It must be in playlist folder under the root
And It works.