Passing a DTO into a static domain 'Create' method
If the Playlist is an external dependency then it might make sense to use an extension method like:

public static Playlist Create(this PlaylistDto playlistDto, IUserManager userManager, IPlaylistManager playlistManager)
{
    Playlist playlist = new Playlist
        {
            Id = playlistDto.Id,
            Items = PlaylistItem.Create(playlistDto.Items, playlistManager),
            Sequence = playlistDto.Sequence,
            Title = playlistDto.Title,
            User = userManager.Get(playlistDto.UserId)
        };

    return playlist;
}


other than that, if the code is under your control, why not just make another constructor and do away with the static method