Maybe this is intended to prevent "YouTube babysitting" aka "make a long playlist, park kid in front of youtube, go and do something else"? Without the ability to schedule up hours of content, one is forced to look after the child regularly, even if it's just to start the next dull bit of entertainment.
Though if that was the motivation I'd expect them to also disable auto-play of next video for content targeted at kids.
They're trying to avoid issues with COPPA, which basically says that they can't store user data for anyone under 13 without explicit formal consent from a parent (with some really complicated exceptions and ways to comply).
They're trying to shut down all their possible COPPA liabilities because they can get incredibly expensive very quickly so any data on made for kids content they're treating like it's data on kids. Also skimming the FTC's FAQ it sounds like if you're serving a web page targeted at children you have to do a lot more so google having channels aimed at kids puts them under the stricter standards about ensuring kids data doesn't get tracked.
It seems as if the default assumption for all kids content is the "kid" did it, and hence assumed they also made the playlist. Perhaps features will be added at a later date to re-enable features such as playlists with default implicit parental consent.
I rather like the hard handed approach as a parent (who can be both lazy and diligent) as I think it reinforces good parental control of video content.
This will force lots of behavior changes for both consumers and producers. The key will be how they handle the suggested videos, which may have unintended negative consequences, as I am sure the UX will still be based on generated maximum ad dollars, targeted or not, and not "healthy" video viewing.
Makes me think that youtube can't avoid putting a playlist into their big recommendation learning algorithms, or something, so it's easier to just disable the whole feature.
Having a favorites list that follows you across devices is nice. Being able to publish a publicly viewable playlist is nice.
Also, on mobile that would require you to exit the app and move to a browser. Figuring out how to pull up a video from the app in a browser requires a certain level of tech fluency. (You have to know to hit "share", "copy link", paste it into the browser, then somehow force the browser to not punt you back to the YouTube app.)
