I suffered many of the same problems described by others, principally the inability of iDrive to search by Artist, Album, Genre etc. Many thanks to all the previous posters, especially NotBob for the very detailed OP. Thought I would post my experiences on this subject. The only thing that bugs me about my 15 plate car is the awful DAB which is pointless.no signal then 10 minutes then no signal! Total waste and I just don't bother with it now.
Not bothered about playlists as I tend to listen to albums and this works brilliantly for me. I have a 330d with pro nav and by doing it like this, I get all album cover artwork, all tracks in correct order (unlike my friends Audi) The idea of an in car hard drive is appealing but I'd be aware of it being always powered and risk of it crashing. I also copy MP3 albums to blank dvd-r which also hold around 30 albums.
I found that you typically get around 70 albums on one usb and they don't over heat, totally portable and readily changeable. I then buy plenty of 16gb usb sticks and load up the ' music collection' of the car and then keep others in the central compartment. I have a crazy amount of music on Cd and use Easy CD Creator (£25) to convert to FLAC for when listening around the house and then convert all to MP3 at best possible 320kbps. Hi, that all seems great but as someone in the audio industry, way too complex.