Well now, maybe I'm too late to the party, but here are some answers.

You can save up to 1000 songs in a regular folder, 000-999. There are 10 folders, so theoretically you could save 10,000 mp3 at 128kps. Storage depends on the size of your memory card. They say you can use a 4gb , but I'm thinking it will also accept the new 8gb too.
You can only view 4 or 5 files per screen, but the screen will scroll up and down. You can rename Zoom files into 7character names.

I have been able to up/download Zoom files to the SD card with no problem, but I haven't tried loading a regular mp3 yet. I might have to rename it first, we'll see.

As for recording, I find it does equally well with its internal mics and line in material.

For $199, I feel it was a good purchase. I have a hand-held mini-disc recorder I have never gotten used to. This unit is way superior to my MD-N707. Even if I can't use it to play mp3 on the job, it has already paid for itself by letting me resume recoring my choir easily as I used to with a cassette deck.

UPDATE - I just loaded some mp3 into a folder. I physically transferred them from my PC to the H2 thru the SD card. It accepted the original song name and simply scrolled across the screen to read the entire filename. So, I would say you could load up an H2 with as many mp3 as you SD card can handle. You can save them nto ten folders, so those could be your playlists. You could have the same file in multiple folders. As far as searching, I don't have that answer yet.

[This message has been edited by cassp (edited 03-31-2008).]