The folders on the EZ Reader really are Linux directories. There is no indexing involved. The ebook library manager is a VERY thin skin on top of a standard Linux directory structure. So it scales well providing you make the directory hierarchy deep enough. On a large (SDHC) card, the underlying filesystem will be FAT32.
You may be asking about things like last read location on a per book basis. For MOBI ebooks this is stored in a .mbp metafile with the same filename as the .mobi or .prc file. So this scales to any size library (the .mbp files are "hidden" in the standard library view). I think the info on other ebook types may all be held in a single central file, but I'm not sure of the details.
The Hanlin V3 (EZ Reader) is officially limited to 4GB cards, but as I just posted
here, larger cards also work. Note that BeBook says that larger cards "might" slow down the device.
The start up time of a Hanlin V3 is largely irrelevant, because the battery lasts 3-4 weeks if you don't use the device. So I never turn mine off. I can start reading again instantly, whenever I want. The Sony battery is long-lasting too.