Sorry to revive a really really old post but i think i have more insight into this...maybe
I think the amount of music tracks you can play in your playlist is some sort of code in the game, here is how i found out.
The games i was using was Project Gotham 4, SEGA Rally, and a playlist streamed over a PC with 253 tracks on it.
Ok so i booted the game (PGR4) then loaded my playlist, quit the game by going into the Dashboard, and then went to Media blade and then Music and into the Music Player, and it stated Playing 1 or whatever out of 200, so that means that it cut 53 tracks off my list.
So there i was thinking that 200 would be the default maximum until i had a go on SEGA Rally.
I did the same procedure, boot the game, load the playlist, and then go into Dashboard and then Music player, but then it was like playing 5 out of 54. so that cut off 199 tracks.
Really strange and frustrating i can't see why they limit it, if that is the case.
Thanks,
Skykid.