Yes you can, right click one of your favourites and choose "add to playlist" then "new playlist" In the new window name the playlist you can also add a sort title here, I added 001 to the beginning of mine so that it shows first in the list but that's optional. Then check the "include playlist in platforms" box. Then move to the auto populate tab, check the box then in the first dropdown choose "Favorites" leave the rest of that line "as is" then in the second dropdown choose "Platform" leave "is equal to" and type "Arcade" into the end box, see pics attached.
This will create a auto populating Favorites playlist, and whenever you add another favorited game it will be automatically added to the playlist.