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You cannot change the way that Calibre utilises folders to store books. If you cannot live with that then you will not be able to use calibre. The whole idea is that you use Calibre to manage the books you have added to it - you do not go into the underlying folder structure (which Calibre reserves the right to change at any time anyway).
If the calibre web server locks up your machine, then it sounds as if there is something wrong with the macine or system software. Calibre runs at the user level as far as the OS is concerned and should never be able to lock up your machine.
What OS are you running calibre on? If it is Windows then there is my Calibre2Web script (search this forum for that) that can help with getting books onto a iPod/iPhone. I assume that on the iPhone you are using Stanza as the ebook reader - that is the one that Calibre has been targetting. I also assume that in Stanza you have set the Calibre web server URL up to be an Online Catalog.
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