Hi ed,
Are you sure you want to do that?
If you're sure, first click on the first item in the list, whether it's Playlists or Categories, and then scroll all the way to the bottom. Then hold the SHIFT button on your keyboard and click on the last item in the list (above "Download more") and this will highlight all the items in your list. Once you have selected all the items, you may press the DELETE button on your keyboard, or the " X " button below the list of items. Follow the dialogues to proceed with deletion.
If you wish to restore the default Library at a later date, you can go to your Start Menu, All Programs, BrillKids, Little Reader HOME BASIC, Uninstall option and select "Repair".
If there's anything else I can help you with, do let me know.
Cheers,
Shuki
