I used to create playlists for everything, but I realized that I was compensating with synthetic metadata for the lack of natural metadata attached to my files. By actually making use of the secondary ID3 tags (Genre, Rating, Kind, Play Count, Skip Count, Compilation?, Disc Number, and other such fields), and making sure they all have correct values, I find that I never have to make playlists, only fulltext-search-then-sort (which iTunes is very good at.) I say this as someone with 28000 listened songs :)
Amarok has similar functionality. With the added benefit of song queueing. So if I want to listen to a particular song without killing my playlist it's easy. And queuing a particular song to be next can influence the dynamic playlist allowing me to have one playlist that changes throughout the day to match my current mood/desires. Itunes doesn't have this feature and doesn't seem likely to anytime in the future.
