i did it with a view and a checkbox custom field, better than a playlist for a nice theatre view IMO
go into tools>options>Library & Folders>Manage Library fields
add new field (i named mine faves). set the data to User Data, data type string, edit type Check
now go into Audio (standard view) and right click, add library view (call it the same thing as your library field). for mine i chose the albums view, but 3d might be nice too if you're not gonna have hundreds of albums in there
once it's made, right click it and customize view
on the left side, it should say Album. in the middle, uncheck "use parent scheme rules..." and then click "set rules for file display"
in that menu, you'll see an empty rule (3 empty boxes). now, write faves in the first box (or whatever you called your custom field). in the second box, choose IS NOT. in the last box choose <empty> (so now the 3 boxes will say "faves is not <empty>")
click ok
now go into any standard view that you like, select all of your favourite albums (or tracks), tag the files, and set the value of "faves" to 1
now go into tools>optons>theater view, select the word "audio" in the left column, then click add>library item from standard view, then choose the new view "faves" that you made
click ok, go into theatre view and the new view appears under audio, with only the albums that you've checked as favourites. you can check or uncheck files with ease and they will either appear or not appear based on that
from here, you can design the view to look like anything you want
hope that makes sense, let me know if you need any more help. i use this view a little bit, it looks really nice in theatre view