If I remember correctly, beta5 on the MK1 had the behavior you wanted in regards to remembering your position in the playlist selection. Hit the button to go back into the menu and it took you where you were last. I think it changed in beta6 or 7, maybe it was when they added Hierarchical Playlist Navigation in B7. I could be wrong though, that was about 18 months ago, anyone else remember back then?

I found a post by clemsonjeep mentioning it, so it changed sometime between 17 August 1999 when I got the MK1, and:

Subject: Humble Interface Suggestions
Poster: ClemsonJeep
Posted on: Fri Nov 19 16:55:29 1999