Hi kensugurro,
pepak's tool is great, but if you want simply to autogenerate collections based on directories you might want to try
mngr505.
Actually, there is no need to use the tool to create the folders on your PRS. You can create them with your usual file manager under the root directory where ebooks are stored (database\media\books).
When you've finished, run mngr505 and choose the command "scan and create collections".
It will create collections based on your existing file structure on your prs 505. Only one level of folders is supported.