Why are playlists breeding like rabbits on my device?
This sounds to me like a similar problem I have had with duplicating images in the gallery. I fixed this by clearing the gallery data, and allowing it to rebuild next time the media scanner ran.

I would suggest trying the same technique. I would imagine that whereas I deleted the data from the Gallery App, you should try clearing data from the stock Android Music Player, or failing that from PowerAMP.

Settings-Applications-Manage Applications-All-Gallery-Clear data (confirm). This doesn't delete your media itself, just the database that details where the media is. The media scanner will rebuild this database automatically next time it scans.

It would be prudent to backup your phone contents before you try this.