Even after your further explanation, I still don’t completely understand how you have things arranged to do what you want it to do. Suffice for me to say that ALL my iTunes music is on one attached drive – basically it’s a dup/backup of my complete iTunes Media folder (and therefore there are some video files mixed it, that do no show up when I go into the music folders because I went into the front door called Music of the main menu.) My playlists are there in a folder called Playlists, they were created with iTunes DJ (tracks are in random order from a large library of selected albums/files that are first filtered by a “Smart” playlist in iTunes.) I select a playlist and bingo, 100 random tracks from my music collection play one after the other.
Now, I want to watch a video, so I press Stop to kill the music, then the “home key” on the media player remote, and I am back to the main menu. (Just ONE button was pressed to get there – I did not back out of the music folders layer by layer.) Now, I select Videos from main menu and go select the movie to watch (that is on a second attached drive; e.g. USB2). It all works for me, and I hope you can get things working the way you want them to for you, also.
So what firmware version did you resort back to that makes things work the way you want them to?