I'm tagging a lot of mp3 files at the moment, so within mp3tag, I have the root of my music folder open:
C:\Music
so all my files appear in mp3tag.
To create playlists, I am selecting the songs on an album by highlighting them, going to File > Playlist (Selected Files), then I have to navigate to the folder of the album where the tracks are stored (C:\Music appears by default so I have to drill down into Artist then Album), and press OK a few times to save the playlist.