Yeah, so that means you have to make new playlists on the iPod rather than in your own library. When the iPod is set to manually update, you can think of it as an entirely separate yet detachable library.
I find the easiest way to do this is select the iPod in iTunes and then add then create a new playlist. Of course, if you're already doing this but they're not syncing then something's wrong. 🙁