A bit OT and apologies if this is old news, but have any of you folks tried the applet Kindle Collection Manager?
http://www.colegate.net/KindleCollectionManager/
Learned about it from here on MR. Though still under development I believe, it seems to work quite nicely and is exactly what I used to setup my Collections folders on my K3. Not perfect, as some books don't always transfer to the proper folders, but for sure, the folders I specify get created exactly as I want. Which is good enough for me at this point.
Then I use the K3 itself to copy/move books into the folders I want.
Works for me.