I use playlists to save trilogies and watch orders for movie franchises.
When I upgrade a movie’s quality profile, the new movie file replaces the old file on the file system. This removes the movie from any playlists.
Playlists should work like Collections: the movie isn’t removed when its file changes. Collections do not work for watch orders because you cannot custom sort them.
This should happen, provided that the old version was matched with the same metadata agent (‘Plex Movie’ vs. ‘TheMovieDB’) as the new version.
On “quality upgrades” I recommend you to not delete the old version of the movie, but to simply add the new version first.
Then ‘Scan Library Files’ and see if the new version will appear as a ‘duplicate’ item or if it is appearing as a separate poster.
If it is appearing as a separate poster, then you changed the library’s default metadata agent sometime after adding the old version of the movie.
This is not an option when using automation helpers like NZBGet and Radarr