the detailed step by step instructions for all these functions are in the "Getting the most from your KN7000" book.
The SD menu has an SD Song Medley switch. In the Mode you can select any or all folders or User Lists.
Therefore if you arrange songs in any folder, they will load and play in that order from that folder.
If you want to rearrange the order of songs, use the SD Tools menu Copy switch, select a song, press Copy, then select the new folder and position and OK it. Continue until done, then use the SD Tools Song Delete switch to erase the original files. Now you have all your songs in any order you want for the Song Medley play. Alternatively load from one card and save to another or use a pc tool.
If you want a different song order from the existing folder order, use the Song Medley User Lists which are selected with the Mode switch. Just press User List Edit, your songs are on the left, select the ones you want, place them in order on the right and press SET. The advantage is you don't have to waste space on the SD card by duplicating songs in different folders. There is DEL to wipe songs from the lists on this page too. Then just select your User List and go.