iTunes 4.5 now has the ability to create nested playlists. Therefore.. all your problems are solved!!!
The NEW procedure is therefore....
1. Create a smart playlist that limits your songs to the capacity of your iPod and call this something like "iPod tunes". If you tick the "match only checked songs" then you can include all the tracks you've previously selected with the old method.
2. In each playlist that you wish to have on your ipod, add a step that matches where Playlist = "iPod Tunes"
3. Select the ipod tunes playlist and any other smart playlist you want to be automatically updated.
4. Update ipod and be thoroughly impressed with the new nested playlists feature!
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