The way I'd go about it is move all the music from the downloads folder to your My Music or the main Music folder at root level. Then in WMP, search for media files from that location so it can add them to its playlists.

For fast & easy access, 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.

You can then choose to share your music folder. Tools>Options>Sharing.