Forget the whole file system thing, your music that is loaded onto your iPhone is not related to your folders on your computer in any way. Unless you create matching playlists (see below)
Also, when you uncheck "Sync Music" you are telling iTunes that you do not want music on your iPhone. It's that simple. So what you should do instead is leave the "Sync Music" option selected and below it select "Selected playlists:". Check and uncheck the playlists below according to what you want loaded.
What you want to do is manage your music on your iPhone using these playlists. If you are like me and manage your music in folders by genre, artist, and album, you can create smart playlists that mimic this.
*For example, I have a smart playlist called "Christian." It contains all music where the Genre = Christian.
*I have another called "80's" where the year is between 1980 - 1989 (this took a lot of manual editing of my music to set the original release date....sometimes I hate greatest hits albums for this reason alone.)
*I also sync the included playlists such as "My Top Rated", "Top Most 50 Played" etc...
*Also, just to fill up more space and to not "ignore" some of my music, I have a random playlist that selects several hundred songs to load. These songs change everytime I sync so some of the music I listen to less often is not forgoten.
*I also have several manually created playlists.
I hope this is helpful.
Edit: And Deacon Graves post is one way of keeping iTunes in sync w/ your files. I personally do not like to let iTunes manage my music. But he's right about deleting the song through iTunes...that way the deletion is seen in iTunes. When adding new music, I often do it through Amazon. When I don't, I manually add it using "File -> "Add File to Libraray" or "Add Folder to Library". Moving music around gets very messy though.