Hi Bookworm Girl. You're welcome! When I installed the Reader for PC it found my books and imported them to the new software, collections and all. It's exactly as I had for the Reader Library (software). The names make it confusing when talking about the old and the new stuff. lol
No I did not manually create the Collections on the Reader itself, although that appears to be the route it has to be. I don't know if I'm just being too grumpy, well, I know I AM, LOL but I don't want to have to do that. Isn't that the point of the software? Make your collection and then sync it with the specific books within the collection onto the Reader. Right now as you say, it's all or nothing.
I had to delete all the books manually on the Reader but then ended up with a bunch of empty Collections that I could do nothing with. The Collections on the T1 itself were classed as SYNC so I couldn't touch them. I can't rename them or delete them. I have to figure out how to not class them as SYNC then I think I can do whatever I want. I couldn't even manage the collection on the T1 via the software. It wouldn't let me. I had to format the fool thing in order to remove the collections.
I don't think it should be that way. The only other option appears to be drag and drop which I haven't tried but the manual says they probably won't appear properly on the unit. ????
I'm not keen on doing it all manually on the T1. I have almost 400 books I'd need to organize and I find the black flashing while doing so giving me a headache. The flashing while reading a book doesn't bother me, but on the browser to search for books and while trying to organize it on the T1 does.
I was so frustrated with it I packed it up to return it. But I'm stubborn and hate not being able to figure it out.

I just don't think it should be this difficult to want to read a book for crying out loud!!