Allow users to create video playlists I have created a content type called "Video" and I was wondering if I should create another content type called "Video Playlist" that act as a container for storing a collection of the nodes that are of content type "Video"?

Each user will have a list of favorites that will be public to everyone and all the other playlists would be optionally public or private only to that user. How would you go about creating this structure/layout? Is this the best approach?
You can use Flag Module with drupal views to create your playlist. Flag module allows you to bookmark contents, comments etc. Then you can display the flagged content by adding flag:content relationship in your view.