The key is of course tagging your music. If your library consists mainly of P2P'd songs it makes more sense to sort by folders, since the tagging will be chaotic. It's also a problem with classical music even if your stuff is tagged, because so much Gracenote tagging for classical music is haphazard.
If I were being judgemental based on the OP's choice of name, I'd guess that s/he might fall into the former category
The Mac + iTunes + iPod doesn't really cater for a way of working with music unless you do have all your stuff tagged properly (or the way you want it).
If on the other hand your stuff is properly tagged and you're just working with a folder structure out of habit, perhaps it's time to switch to the iTunes way of doing it. You can definitely get much more out of your player if you switch to using the tags for organisation.