For what it may be worth, I have a single directory in the root of my Kobos with the book files in the author sort name based directories under that directory. This keeps the root directory tidier looking and avoids the issues with the limit on the number of directory entries remembering that any filename that exceeds the 8.3 limit will start chewing up directory entries for the long filenames.
The only time I've found empty directories is when I have deleted an ebook from the Kobo UI. If you use calibre to handle deletions, an empty directory will be removed.
I use the entire author list for all books. The file and directory names are truncated to the first entry in the author/author sort but sending the full list of authors allows me to search for an author and getting any anthologies they've contributed to being returned as part of the search results.
Since most of my ebooks are in 2 or 3 genres, genre based collections would have 1000s of entries making them rather useless. Currently, my Sage would have ~1800 in science fiction, ~1300 in fantasy and a mere 387 in food/cooking.
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