Honestly, I have no idea whats going on but now it works fine. Its like it needs to be in a certain "menu" to work but then after you get one song upload its no problem adding the rest. I just want some consistency so im not worrying about the functionality of my site. Any ideas on why this might be happening? Any code to make it work better?

The problem seems to happen when you use "playlist" menu item rather than "playlists". In "playlists" seems to be working fine but it's required to hit "Consolidate playlist" option so that it works. It saves the playlist in the database playlist table. The problem seems to happen with the "On-the-go" default playlist your system have. With this one, changes are not saved to the database.

Could anybody help us here? Is this a bug or are we doing something wrong?

Sorry, but I found it. The problem seems to happen when the "Allow playlist storage" was not specificied as "yes" or "no" at the menu item where the playlist run. If you have the "Use Global" option selected, then the problem with the default playlist comes out.