What format should I use?

I suggest Midis (.mid, .midi, .rmi), which are very small, and can even be better than a .wav (if the user has a good sound card).  Of course if you know a few things about Midis, the main downfall is that it can only play notes that the sound card supports.

How do I add new play lists and tracks to a list?

Upload them into the folder that you set in config.php as $startfolder (all folders inside that directory will be considered a play list).

How do I add remove play lists and tracks?

Get it out of $startfolder

How do I move tracks and play lists to a different location?

Just move it into the preferred location.

It doesn't play anything or it asks for download!

First, check to see if your speakers are on.

Second, make sure that your server supports the correct MIME headers.   Ask your system administrator what you can play or if they can set the correct MIME headers.  For more help with Real Audio files (.ra(m)) visit http://www.real.com.