If any PC user has been able to get their playlists to work then let me know what software you used to create the playlists and what synch method was used. Hopefully if I use exactly the same then it should work on my device as well.

Since your dragging and dropping, here's what you do. I'll give the instructions based on using Windows.

1) Open notepad, and open the playlist file
2) Go to edit > replace (or press ctrl+H)
3) For:
Find what: \
Replace with: /
4) Hit replace all and save the file

Then try the playlist on the n900 to see if it works.

Okay update. After wondering why one playlist worked and another didn't even though they had identical paths on N900 and PC I decided to create all my playlists again this time using Media Monkey since I knew that unlike Winamp it at least creates relative rather than absolute paths for playlists. I also saved them in the same place in both music folders. Previously the playlists on PC was in Playlists folder whilst on the N900 it was in My Playlists.

Now I am almost a completely happy bunny. Just need to find how to solve the problem of the device messing up my tags by showing Various Artists and I will be a completely happy bunny.