To clarify, if you had left Alfred's advanced playlist setting as the default setting, then everything would have operated by design. Alfred would have created and maintained his own playlist in Music called Alfred Playlist (the default name), and never touched your other playlists.
There is no unintended destructive behaviour here. By entering in a name of one of your own playlists, you were instructing Alfred to use that as his transient playlist while using the Mini Player.
I will update the help text under this setting to clarify what this setting's purpose is.