Well, there's a number of different ways you could do this, depending on what you're looking for. Let's start with the RetroFE terminology:
A collection is a set of items (most often games), normally placed in a single directory in the collections directory of RetroFE.
A playlist is a subset of a collection that uses the same system and medium artwork as the collection.
A subcollection is a collection that can use the same medium artwork as the collection it's drawn from, normally placed in a single directory in the collections directory of RetroFE.
A merged collection is a collection that combines multiple subcollections.
RetroFE uses different keys to switch between menu items (the items of a collection), and playlists (the subsets of a collection).
With that in mind (I know, it may be a tad vague so far), let's have a look at your request.
Your main collection (generally collections/Main) should consist of two sections: Platforms and "Playlists". I'll presume for the moment that playlists are all Arcade games. We'll come back to Arcade games in a moment, but first focus on Platforms:
You create the following collections:
- Main
- Platforms
- Super Nintendo
- Sega Genesis
- etc.
Your Main collection will contain a menu.txt file with Platforms in it (just a single line listing Platforms).
Your Platforms collection will contain a menu.txt file with Super Nintendo, Sega Genesis, etc. in it (single line per system).
Your Super Nintendo, Sega Genesis, etc. collections should contain your roms, your system artwork, and your artwork per game.
The art for Platforms (logo, video, etc.) can go in the collections/Platforms/system_artwork or collections/Main/medium_artwork/<art type> directory; that's up to you. I prefer to put them in the system_artwork myself.
You can override all paths in RetroFE, so the directory structure isn't fixed, but I prefer to keep every collection in the same directory structure.
So now you've got
Main -> Platforms -> Super Nintendo
-> Sega Genesis
-> etc.
For the second part, it depends a bit on how you want to select your "Playlists":
- Similarly to the Platforms setup, using the same control keys.
- Playlists, controlled by the playlist keys.
Personally I would prefer the first way, since it also allows you to set up a favorites playlist for each "Playlist".
Step 1: Create your Arcade collection, containing all the arcade games you want to play, and the corresponding art.
Step 2: Create a subcollection for each "Playlist".
Step 3: Create a "Playlist" collection, similarly to the Platform collection defined above, with the menu.txt containing all the "Playlists".
Step 4: Add "Playlists" to your collections/Main/menu.txt file.
Step 2 is rather simple, e.g. Multiplayer:
- Create the collections/Multiplayer subdirectory.
- Add the system_artwork you want displayed in your "Playlists" selection.
- Add an Arcade.sub text file containing all the games that should be in this Multiplayer "Playlist".
You now have:
Main -> Platforms -> Super Nintendo
-> Sega Genesis
-> etc.
-> Playlists -> Favorite games
-> Multiplayer
-> and so on
All selection is done using the menu item selection keys.
Alternatively, you can add "Arcade" to your collections/Main/menu.txt in stead, and create playlists in the collections/Arcade/playlists directory. The playlist selection is then done using the playlist selection keys, but there are fewer options for animation for that.
The next question is: how do you want it to look on the screen? For some themes, every menu looks the same (in a HyperSpin like wheel setup for example), but for e.g. Aeon Nox the Main menu looks different than the 2nd and 3rd layer menu, and in that case you may need to do something about the theme as well. Let me know what you want to achieve there exactly.