The Library only has tags and not folders. Any file you add to the Library is copied from the source location to a hidden directory in Internal Storage (which means you now have the file in two places).
If you don't need to annotate a PDF, you can open it from Internal Storage, SD card or USB memory stick by using the Storage app and long-tapping the file and selecting "Open in Reader". This will allow you to use folders for organizing your files, and if it's on a usb memory stick you can have lots of files and easily sync them on your deskop, back and forth. BUT, you won't be able to annotate them.
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