Afraid I have to agree with the majority here - why would you want to sort your music by file/folder?
If your music is well organised, then surely it wouldnt be that hard to tag it - there are so many programs that can automatically tag an album for you (MP3Tag being my recommendation)....
I would imagine that 99% of people using Media Center have their music well organised by both folder AND ID3 tag, and they would all prefer Media Center to use the tag system, as it does now....it allows for so many features, such as searching, sorting, playing by artist, genre, etc, that to have a folder system in place would be a step backwards...My music collection isnt the largest here (3000+ tracks), but I have mine sorted neatly in folders (for my iAudio M3, which, on a slightly different note, I recommend to *anyone* after a hard disk based MP3 Player), and fully tagged, for use in Media Center.
And to be honest, I doubt Microsoft will ever implement a folder system - they have been pushing music databases since Media Player 7 (?? or is it 8). And, searching through these forums, I haven't found a single other person who has asked for the feature to be included (though I admit it wasnt the most thorough of searches...)
Tag your music, and once you see how much slicker Media Center is, I can't seriously see you wishing for folder based navigation again....
Just my GBP 0.02 