Go to your LW Library window, select Saved Files folder & press the Explore button. Sample image here: Using Library Explore button to access downld folder (click on link) & the folder will open up for you. Then you can cut & paste the song files into your Music folder.

FYI: By default, the downld folder is generally here: C:\Documents and Settings\"your account name"\Shared

I would "also" recommend moving your music to your music folder before adding to any playlist as you're wanting to do.