The PSP has a limited folder tree. Basically with the PSP, you have a song folder and you are limited to 2 "branches". Basically for songs you have \PSP\Music\ (whatever you want to call this folder). How I did this with other software, as well as MC12, is the Podcast would create its own folder, and the music would sync to this path \PSP\Music\Music Files.
So, when I look at my audio, I have all my podcasts as folders, then I have one folder for music.
With MC12, you have a sync path for playlists and one for audio. It seems, at least to me, the audio path takes priority over the playlist path. I wish I were just screwing up, but I have tried several variations. I sync a playlist, but it syncs to a folder path defined in the audio path (which happens to be the same path for my podcasts, hence my request). If the playlist path worked, I wouldn't be posting here.
So now I use Media Monkey to sync my music and MC12 for my podcasts. In order for me to remove old podcasts, I have MC12 set to delete any files not on my sync list, which means my music, and old podcasts. I then go and sync my music with Media Monkey.
Doing this puts all my podcasts here \psp\music\"name of podcast"\ and then media monkey puts all my music here: \psp\music\music files\.
Geez, I hope that explains it.