Nice article, explaining lot of questions!
Lukas Richter

Hi Lukas — I’m a bit confused by your question. You say you this is about how Playlists work, but then you go on to describe a problem unrelated to playlists. If a song gets badly substituted when uploading to iCloud Music Library, the bad substitution happens regardless whether that track is in a playlist or not.

Yes the bad substitutions suck but the problem is not related to playlists.

I believe that bad substitutions happen because Apple wants to reduce the number of duplicate tracks in the cloud. So they end up guessing in some cases, and guess badly. I really wish they would offer an option to “force” MY version to live in the cloud rather than using their guessed version.