Some questions to help explore if i was in your shoes:

• Are these internal playlists (db) or external playlists (m3u)?
• if external playlists- do they list the full filepath or just the relative file path? (Youd want relative)
• does the user have access to both libraries? from the docs:

Playlists: Can contain songs from multiple libraries (user must have access)

Smart Playlists: Can be scoped to specific libraries using filters

I haven't experimented with multi library support but that first bullet point makes me think that (db) playlists might be tied to the original library song, and navidrome is expecting the user to have access to that library to play those songs even if the songs exist separately in the current library via symlinks. The second copy of those songs are likely treated as second entries in the db even if they ultimately are the same file.

An alternative approach would be to create a backup of the db, and then delete the symlinks, delete the "missing songs" from the navidrome ui, and then move the song files to the new library. Right now you're thinking of doing a parent library (all files) plus a child library (selective files from parent), but id treat the default library as "core" songs everyone should have access to, and then a second "personal" library for your specific songs. The caveat is i don't know if navidrome will be able to tell the songs moved from one library to another. If not, then this could be pretty messy if you're wanting to keep annotations and playlists which is why i suggest a backup.