Holy crap it worked! You (and PC2 from the Malibu forums) are my new best friends! Very convoluted and not at all intuitive but it does work. I'm copying and pasting just in case something happens to the other post on the other forum but all credit goes to PC2 (and quirkySquirt for finding it):
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How to program playlists on Mylink favorite buttons
NOTE: USB drives have to be ejected safely from your computer or else they can be damaged. Follow your computer's procedure to do this. Also, do not remove USB drive from USB port in your car unless you turn your car off, just to be safe.
I could not find any written instructions on playlists so I finally had to call Mylink directly to get this info, I am passing this on to you:
Now that you've created your mp3 or wav files, copied all the artist folders, song files and your playlists to your USB drive. It’s time to program Mylink.
When you first plug in the USB drive and turn on car, Mylink will scan the drive and enter song info into its memory. It will redo this every time you unplug and re plug your USB drive, so it may not be ready to be programmed for a few minutes depending on how many songs you have.
PROGRAMMING FAVORITE BUTTONS
When Mylink Favorite buttons are ready to be programmed, press plastic Home button (house icon) under LED screen. This will take you to Home screen.
Press Audio button on Home screen. If the USB drive has been recognized it should start to play. Press pause just so you are not distracted by the music.
If Mylink is on any other function than Media, press Media button on Audio screen. Along the bottom of the screen you will see a menu. Click on Browse icon, then click on Playlists icon.
You will now be on Playlists screen. Here is the tricky part, slide your finger up from the bottom of the screen so it will slide between the Genres icon and the More icon on the far right side of menu. This will bring up the Favorite buttons along the bottom of the screen without triggering some other function. Screen real estate is very tight, that is why you slide up between the 2 icons.
Now scroll sideways right or left until you see the Favorite button number you want to program.
Press and hold that button until all menus drop away and you can see only the Playlist screen.
Next scroll up or down to get to playlist you want to program into that Favorite button. Touch that playlist, if you hear a strong beep and the play control menu comes back up again, it should have taken.
There cannot be any delay between holding down Favorite button and choosing playlist or else you will have to do it again.
You can check by swiping up again from the bottom of the screen so Favorite buttons reappear at bottom of screen. If you playlist isn't there, try procedure again.