A few years back when resources were not as plentiful I did this, so hopefully it won't be quite as intense as it was for me.
The application I chose:
MP3Blaster (search freshmeat)
For your LCD output, check out lcdproc (assuming you mean a small LCD like one in a clock radio or something similar, and not a small 12" LCD monitor).
You can setup any keybindings you want with that application, there is no need to write a special plug-in to do what you are talking about with the playlists.
Not sure how far you are going to take it, but I placed the final product in my truck with a removable hard drive rack (to make tweaking easier) and hooked it up to the changer input on my pioneer deck. There's a cable that is commercially available that converts that input to 2 RCA inputs, which I used a 1/8" stereo to RCA cable to attach into.
Amazingly, I just checked, I sorta outlined parts of it at an OLD OLD site I used to maintain here: