I'm using svn-1498. Would it be better to try svn-1586?
Couldn't hurt. I can't think of specific issues in playlists fixed by 1586 over 1498, but 1586 is stable.
The most likely thing I could think of would be how long it would take to retrieve the playlist info. When the soundbridge asks for playlist data, it makes a pretty expensive join to get all the data the sb needs. Its possible (probable, even) that if the server is a slower machine (nslu2, linkstation, or some other embedded device), it might not have the horsepower to run the query before the soundbridge times out and gives up on it.
That would be my guess, anyway.
I don't have a good fix for that, except to wait for next nightlies. The playlist stuff is all being reworked to improve performance on playlist queries (and to be able to do often-requested playlist stuff like "top x" items and server-side sorting).
What kind of machine is the server on?