I wrote this short AppleScript to make a smart playlist for every artist in my iTunes folder. You'll need to enter your own directory on the line that starts set tunesFolder, possibly change the keystroke commands if you've changed yours in iTunes, and finally, edit the delay 1 lines if your machine is too slow to keep up.
The script takes about one minute to process each 20 artists, so be patient. I was forced to use System Events, because there is no way to create smart playlists directly from AppleScript.
[robg adds: I haven't tested this one, but you should probably also quit iTunes before running the script.]
Mac OS X Hints
http://hints.macworld.com/article.php?story=20070305115308240