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Yes. This process is known as playlist nesting. Playlist nesting can be useful for creating continuous streams.
In the following example, the playlist named MainPlaylist.wsx makes the publishing point stream continuously by switching between Playlist1.wsx and Playlist2.wsx. You can use this type of playlist to update the content played by the publishing point without ever having to stop streaming.
<smil>
<media src="playlist1.wsx" />
<media src="playlist2.wsx" />
</smil>
<smil>
<media src="welcome2.asf" />
</smil>
<smil>
<media src= "welcome3.asf" />
</smil>
Playlist nesting can cause some unintended effects or server instability if it is not performed properly. For example, a playlist cannot reference itself by using a physical URL such as http://server/playlist.wsx. In this instance, the playlist will not stream and your server may become unstable. In addition, if a playlist uses a local file reference, such as C:\Wmpub\Wmroot\Playlist.wsx, it will fail and then proceed to stream the next item in the playlist.
The server may also become unstable when two playlists reference each other. In the following example, playlist1 references playlist2, which references playlist1. Because the server can never successfully complete a data path for the playlist content, the playlists continue to build up in memory. This implementation will eventually cause the server to become unstable and fail.
<smil>
<media src = "playlist2.wsx"/>
</smil>
<smil>
<media src = "playlist1.wsx"/>
</smil>