That's because Now() and FormatDate() work with "number of days since 1900", but PlaylistTime() returns values in milliseconds. A conversion is needed:
formatdate(math(PlaylistTime(0,0)/86400000 + replace(now(), /,, .)), HH:mm:ss)
This however doesn't really work well as the timestamps keep advancing while the current track is playing. This is because PlaylistTime() doesn't take into consideration the current track elapsed time. A Feature request is needed, perhaps a new mode for PlaylistTime().