so your playlists that you have now point to files that are ONLY on CDs and not locally stored? i think that answers some questions i was silently having...

AHunter3:
I think a lot of people would be interested to hear your explanation of what you are doing with the playlists.

But in the absence of facts, let me speculate about what you are doing.
You said that you usually have one playlist for each album (of which you have 10-12 on your MP3 CDs). I suspect this is a list of your favourite songs from that album. So then you have two choices for each album - you can play the whole album (all the songs) or you can play your playlist (just the favorites). But the problem is that you get a huge list of playlists since you have one per album.

A different way of doing things would be to label each song as a "favourite" and then tell iTunes to play only those songs which are labelled as "favourites". That way you don't need to keep a separate playlist ofr each album but still get what you want. And in fact, iTunes already has a facility built into it to support "favourites" - it allows you to rate songs and then play by rating.

You also have checkboxes next to individual songs. Don't like track 7 from some specific CD? Turn it off.

Ah, well.

Your dissatisfaction seems to be centred around not being able to launch playlists from the Apple menu and not having a big enough disk to contain all your music.

My iTunes collection is available from a dock folder like this each album icon is an Applescript which links to an album playlist in iTunes.
This system could be arranged to mirror your own Apple menu selections.

80 gig disks are so cheap these days, why go through the hassle of digging out a CD every time you want to listen to a different track? Also iTunes keeps a separate database for CD's so you don't need a playlist for each album on a mp3 CD, just sort by Album (click the column header) OR type Album name into search box, use the shuffle button for random play of that album or all tracks on the CD. etc etc, If the problem is that none of your music has id3 tags, then iTunes will not be of much use to you, but its hardly a fault in the software.
Personally I like the fact I can random play for 16 days without hearing the same track twice, and the rating system quickly becomes indispensable, but then I'm kinky like that ;)

dD