Well I've been playing with mine all day and thought I'd make some observations.
First thing I ran into, it plays folders alphabetically by file name, not track number. Fortunately the Media Explorer (a simpler Windows Explorer plugin) has a simple option to sort a folder in whatever way you choose, it auto renames the files to fit your sort of choice. I'm assuming this is the playlist feature they mean, you select custom sort, then order them, then hit save and the folder will play in that order. There doesn't appear to be any support for multi folder playlists.
Next, the sound quality is amazing. I've got a NJB3 and didn't think this itty bitty player would be able to even compare to it, but I've been quite surprised. I get a vague feeling of the sound not being quite as full, and the bass isn't quite as strong, but other than that the little player is amazing. Really nothing that I would even notice in a mobile application.
It also drives my phones a bit better than I was expecting, given some of the previous comments. The supplied buds are decent enough (pretty much the same to me as the mx500s and cheapo sonys I own, I can hardly tell a difference between the 3) and the player can drive them well. It actually has a slightly harder time with my KSC-35s, in a noisy environment I was pushing them up to 35/40 and I worry that they might not survive walking down the street with traffic. However, it drove my V6s wonderfully... it's odd, I've always had more trouble driving them than the Koss, but for whatever reason the closed phones are just working better with this little guy.
So anyway, I absolutely love it, I still can't believe how ridiculously small it is. And it just feels good in my hand, easy to operate and simply cool - especially with the classy shiny black and silver color scheme. Oh, and I fiddled with the radio a bit and it's certainly acceptable.. I was picking up all my usual stations fine and very clear. I live really close to DC though, so this isn't really as much a test as some might need.