Libraries>Music>Playlists
WMC still uses the 'filename.wpl' method and you can search for these from the start menu. Yes, they can be edited.
It looks like this in notepad:
<?wpl version="1.0"?>
<smil>
<head>
<meta name="Generator" content="Microsoft Windows Media Player -- 12.0.7600.16415"/>
<meta name="ItemCount" content="0"/>
<meta name="IsFavorite"/>
<meta name="ContentPartnerListID"/>
<meta name="ContentPartnerNameType"/>
<meta name="ContentPartnerName"/>
<meta name="Subtitle"/>
<author/>
<title>test</title>
</head>
<body>
<seq>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - Be Somebody.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - Behind Those Eyes.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - Father's Son.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - Here by Me.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - It's Not Me.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - Landing on London.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - Let Me Go.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - Live for Today.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - My World.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - Never Will I Break.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - Right Where I Belong.mp3"/>
<media src="..\3 Doors Down - Seventeen Days\3 Doors Down - The Real Life.mp3"/>
</seq>
</body>
</smil>