I'm not sure if this changed between 505 and 600 and 650, but I always started out with a folder named Sony Reader. (If you insert a blank card, I believe the reader will do that automatically).
Then - if I remember correctly - you can put books anywhere within the Sony Reader folder.
I know that my eBookwise didn't like more than a certain number of files in the root folder (the main card, without any folders). I've tended to take that forward to all my readers, just to avoid any potential problems.
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