For example, you could do a button press for 2 seconds could mean next letter, and then a quick click just means next playlist entry. That would be the best situation I think.

So if you want to skip to the letter 'K' you'd need to do ten separate long presses? 20 seconds to select a letter? Even if the long press delay is 1 second or 1/2 a second, that doesn't seem very useful. Even if it was done so that you could hold down the long press and it "repeated" the "next letter" command each time, it'd still take a long time, and you'd have to look down to see which letter you're picking (or count beeps or whatever.) *Maybe* if a knob press was used to switch from playlist to letter select mode it'd be usable, but that's about the only way I can think of it working in such a way that the left/right buttons do most of the work.

IMHO, the only reasonable way to do something like this (and one that leaves Mark I users out in the cold, unfortunately) would be to use the left/right for one function (individual playlist selection) and the knob for the other (changing letters). Those could be reversed, possibly.... But if you try to overload the left/right buttons for both letter and individual playlist selection, I think it becomes more of a hassle than it's worth.

I'm not trying to poo-poo your idea, but as the most likely person to try to implement something like this, I really have to question what the best way of doing it is.