Each of the search filters here does a slightly different thing (and the diversity is nice!), and you may want to adjust to use the one that meets your needs. AlexB's trick to use Track #1 as the basis of defining an album is good. Note that sometimes you might have a partial album that has no track 1, so rules based on this will miss. I use a random-select approach, so that exactly one track from each album is chosen, and then the album is expanded fully.
The [Media Type]=Audio is of course necessary in a smartlist not located under Audio. You might need to adjust or limit the results additionally if you want to ignore certain types of files, locations, etc. For example, I didn't show that I also filtered out some test audio files... sneaky.