[KevinH]

My best guess is relative hrefs for things stored above the opf are not being allowed (ie. hrefs in the opf that start with "../")

So maybe instead of moving everything into folders, just moving the content.opf to the root of the epub would work.

Ruling out hrefs in the opf that start with "../" is done primarily for security reasons (think of the location of the opf like an index.xhtml file and ereader as webserver that will not allow you to examine files outside that starting folder).

So for maximum use in e-reading devices, I would typically use a more normal structure for your files (ie. Calibre's Arrange into folder, or Sigil's "Restructure to Sigil Norm").