Can't get my IPOD to work like I expect

Question

I've just bought an IPOD being an MP3 player user before. The IPOD is not working how I expect.
If I create a Playlist in ITUNES, from my MP3 library. I must download my whole 'My Music' library to the IPOD first.
This cannot be right all I want is a Playlist'
Basically do I have to 'Sync' my whole library onto my IPOD'?
I'm sorry if you think this is a stupid question but I cannot create Playlist's without downloading my whole library.
Someone please put me right!

Answer 1

*Basically do I have to 'Sync' my whole library onto my IPOD'?*
No you can choose to the option "Sync Music - Selected playlists" instead of all songs and playlist or you can "Manually Manage songs and videos" and drag and drop what you want to the iPod:
Loading songs onto iPod automatically - Windows
Managing content manually on iPod
*cannot create Playlist's without downloading my whole library.*
You can create the playlist or playlists you want then use a keyboard shortcut to prevent the iPod syncing, once you are connected you can then change the setting to selected playlists and select the ones you want to sync. While connecting the iPod to the computer on Windows with iTunes 7.3 or later installed hold down the Shift + Ctrl keys together. This will stop the iPod from auto-syncing with iTunes and the iPod will appear in the source list. Wait until you are sure the iPod has mounted, and that it will not auto sync and then you can let the keys go. This may take between 20 to 30 seconds depending on your computer: iTunes - Keyboard Shortcuts for Windows
When the iPod is connected click on it's icon to bring up the preference tabs, go to the Music tab and choose Sync Music and the Selected playlists radio button. Choose the playlist(s) you just made from the selection and click Apply.