Free App: Couch Music Player [iOS] iTunes

CNET: Drag, drop, and rock with Couch Music Player for iPad
Lifehacker: Couch Player Brings Awesome, Gesture-Based Playlist Creation to the iPad
AppDevStories: App of the week
Instantly create as many dynamic playlists as you like and turn your iPad into the ultimate multi-user juke box. Couch Player is the music playback app your iPad has been crying out for, and brings incredible new levels of personalization and organization to your digital music library.