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I'm notorious for telling people "read my .sig" but I did write a fairly long explanation of why calibre does what it does. It's worth a read.
The short version is that your computer's filesystem is actually a fairly weak way to organize books. If you have a book written by Able and Baker, where do you put it -- under /authors/able/ or /authors/baker/? If some of its stories are far-future SF and some are modern mystery, do you file it under /genre/SF/ or /genre/mystery/? Sure, you can make compromises, but with calibre, you don't need to compromise. You list both Able and Baker as the authors, and you tag it for both SF and mystery. Then you can pull it up any time you're looking for books by Able or Baker (or exclude it if you want books by one that aren't by the other, for that matter). It'll appear if you list SF or mystery or both, and if you tag accordingly, under short fiction as well.
In short, there is nothing organizational you can do with your filesystem that you can't duplicate (often trivially) in calibre, and an enormous number of things you can do in calibre that your filesystem doesn't stand a chance at.
By the way, my buy.com email informs me you can get an 8 gig flash drive for twelve bucks, free shipping. You should consider that (or two of them, rotating) for an off-site backup, otherwise known as tossing it in a desk drawer at work. That would take care of your space issues and your backup issues.
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