Regarding directory-based navigation:
Using the Collections Manager hack for the Kindle, you can easily
create collections in bulk based on the directory structure. Using calibre, you can natively create collections in bulk on a Kobo, based on configurable metadata columns, and do the same via a plugin for the Kindle.
On the Kindle, you can use the hack to create nested collections, for multi-level sorting.
The difference between a collection and a directory listings is that
collections are tags and you can file books in multiple collections, in addition to duplicating the directory structure.
So
if you are willing to look into how to make your device work for you, your ereader becomes very powerful, beyond what the manufacturer has exposed to you. If you aren't, then you probably don't care what happens so long as you can read your book already, and don't want to think too much about it.
Personally, I
prefer my Kindle's turbocharged collections to directory-based navigation, with the help of Ixtab, NiLuJe, and the rest of the amazing MobileRead dev team. It is so much more powerful.
Why anyone would settle for directory-based navigation is beyond me.
Either way, though, the Kindle has equivalent (or debatably greater and more powerful) options, and so does the Kobo to a lesser extent, since I don't think anyone has figured out nested collections on a Kobo -- but I don't follow the Kobo news, so I could easily be wrong. With the Kobo it would be a tradeoff -- multiple collections per book vs. multi-level collections.
So the Kindle's sorting should not be a deal-breaker. At least in this regard, and you already know my opinion on how much the bookstore distracts from reading.