Hi rblover69, welcome to MR.
You can't actually create collections on the 900 itself, that is a big peeve of mine as well. You can use either the Sony software or Calibre. Most people prefer Calibre and that is what I use as well. Using Calibre you can add and change the tags on the file and then the reader will create a collection for all of the tags. So if you have a book and add the tag line: "horror,not read". It will appear in a "horror" collection and a "not read" collection on your reader. It will also create collections by author and for series too.
There is a whole forum here on MR for Calibre: http://www.mobileread.com/forums/forumdisplay.php?f=166
The only thing I use the Sony software for is place the books in a collection in specific order, other than that it is Calibre all the way.