The playlist gets stored in the directory you created on install (c:\VideoPlaylistCreator), which is why everyone needs to add this directory to MyVideos to access the playlists you create through the app.
You can change the directory to which the playlists are stored -- if you are willing to do a little minor programming. In the zipped file is a file called "MediaEncoderListMaker.cs" Open this file in notepad and search for the following text: "FileStream("c:\\VideoPlaylistCreator\\_" + _lml.ListTitle + ".asx", FileMode.Create)". To change the location of the saved directory, replace the text "c:\\VideoPlaylistCreator\\" with the location of the directory where you want to store the playlists. Leave everything else in the quoted line above the same! And note that it is necessary to use a double slash "\\" between folders. So if you normally type a location as:
c:\My Documents\My Videos\Playlists\
Your edited MediaEncoderListMaker.cs file should look like:
FileStream("c:\\My Documents\\My Videos\\Playlists\\_" + _lml.ListTitle + ".asx", FileMode.Create)
Easy edit, but most should play it safe and follow the installation instructions.