How do I add podcasts to the "All Songs" playlist?

I'm not sure how you would do it using iTunes 10 that is different from using iTunes 11. If you can explain how you did it before (using iTunes 10), I may be able to help you do it the same way in iTunes 11.

However, THIS is how I would do it. Instead of using the Genre setting, there is a different setting that determine how iTunes identifies an item's media category (whether it's a song, podcast, audiobook, etc.).

Select the podcast episode in iTunes. You can select more than one episode at once. Right-click the selection and choose Get Info. On the Info window, go the Options tab. Set Media Kind to Music. This tells iTunes that this item is now a song.

NOTE: It will now appear in your iTunes Music library. The podcast name is the song's Album. The name of the episode is the Name of the song.

Since iTunes now treats the podcast episode as a song, it should be in the All Songs list on the shuffle.

TIP: To avoid getting the podcast episode "lost" in your music library's long list of songs, create a new playlist in your iTunes library. Add all the podcast episodes you want to "modify" to that playlist. In that playlist, select all the episodes at once, and do a Get Info to change the Media Kind setting. You can then use this playlist as the source to add to the shuffle.

This may be a better way, instead of changing the Media Kind of a podcast episode to make it a song. It uses the shuffle's features as designed. First, if the iTunes sidebar (along left side of window ) is hidden, from the menu bar, under View, select Show Sidebar.

Create a new playlist by clicking the Plus sign at the bottom of the sidebar, and name it as desired (this playlist will hold the songs and podcasts for your swim). Add the songs you want for your swim from your Music library, and then add the podcast episodes your Podcasts library.

Select the iPod in the sidebar under DEVICES. To the right, the iPod's Summary screen is shown. Toward the top, where it says Summary, click on Music next to Summary. This is the iPod's Music screen. Check the box for Sync Music.

NOTE: If your iPod is currently set up to use the Manually manage music setting, setting up automatic syncing replaces the iPod's existing content. Any songs that are on the iPod that are not in your iTunes library (on the computer) will be lost. If this is a problem, please post back. It's easier to explain using automatic syncing, but you can also set this up using the manual method.

Choose the option to sync Selected playlists, artists, albums, and genres. Find that playlist for swimming under Playlists and select (checkmark) it. If you have other playlists with songs for the iPod, you can select them too. You can also select other items from the other lists, as desired.

Toward the top where you clicked on Music, click on Podcasts. This is the iPod's Podcasts screen. Check the box for Sync Podcasts (and uncheck the box for Automatically include... if checked). You don't need to specifically choose podcasts here. Just go the bottom of this screen, and where it says Include Episodes from Playlists. Find that playlist for swimming there, and select it.

When you click Apply, the items in your selections (on both the Music and Podcasts screens) sync to the iPod. Going forward, you can update that playlist for swimming (add/remove/reorder items) in your iTunes library. The iPod does not need to be connected. The next time you connect the iPod (or click Sync if already connected), iTunes updates the iPod with the same changes.

When playing the shuffle, use VoiceOver to select that playlist for swimming. The shuffle's power switch needs to be in the (middle) play-in-order position because podcasts are skipped on playlists when the shuffle plays in shuffle mode. The playback order is what you see in iTunes, before syncing. So, if you want to make sure podcasts are always heard during the swim, you can put them first in the playlist order, followed by songs. If you want a "random" selection of songs to follow the podcasts, I would use the Genius feature in iTunes to create a list of "sound good together" songs based on a particular song that you like; copy that song list to your swimming playlist after the podcast episodes.

The Media Kind for something that is currently an audio podcast is grayed out? That's odd...

Previously, in iTunes 10, I could drag the files from their external folder to the Music listing

When you say "external folder," this is a Windows Explorer folder? So you are adding new content to your iTunes library from an outside source, like a download from a web site. These are not podcasts that you downloaded from the Podcasts section of the iTunes Store.

Actually, I should hav asked this question at the beginning. Why do you want to play podcasts from the All Songs list? There may be a better way to achieve the functionality you want by putting podcasts on playlists, and syncing the playlist to the shuffle.

You didn't answer my question about the source of the podcast files?

The manual management options for the iPod do not affect your iTunes library.