Well, it should be (if at all):
%artist%-%album%.m3u
Still, it does not work as you have to set a string constant if you want to create a playlist with the built-in function.
Yet, you can create an export that outputs a text file in the format of a playlist. And for an export filename, it is allowed/possible to use variables.
Is it possible to drag the root (wehere all artist name folders are) to mp3tag and hit "save" so in each album folder will be created a %artist%-%album%.m3u?
I am a bit unsure if that works before I mess up my audio collection
Not quite - it is: "for each album folder will be created a ... m3u"...
The generated file can then be found in the current work directory.
Unless you enter a fully qualified path as filename for the export, e.g.:
e:\music\%artist%\%album%\%artist%-%album%.m3u
PS: the "if at all" was just a little reference to the invalid syntax of "%artists-%album%.m3u" - the field is called %artist%. Your example had an "s" too many and a "%" too few. But nevermind.