I deleted all xml files from the nslu. I then rescanned and it removed all playlists (as expected). I copied the xml file from the itunes directory back to the nslu into the base folder. I rescan and my playlist names are there but there are zero songs listed in them.
from windows xp perspective the directory is as follows s:/itunes.xml
where the music is s:/itunes/song folders. I think I tried to move the xml file one level below into the itunes folder above the song folders but it would not pick up even the playlist names after a rescan at that point.