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A typical tagging/category implementation would work something like this -- you select a file/ebook from the Kindle list of books, select an option that you want to add a tag, and then enter the text of that tag with the Kindle's keyboard. You would need to do this for every book to which you want to add a tag. This can take a fair amount of time if you have over a thousand books.
One of the advantageous of folders is that they are easy to manage using existing PC technology. I can use standard techniques, such as clicking the first file in a list and then use Shift-Click to select the last file as well as those in between, and now I can just drag and drop those files into a folder. It is much quicker to manage than are tags. Furthermore, Amazon uses auxillary files to keep track of notes, last spot read, etc. these files can continue to remain in the root directory so that two files with the same name and size would use the same auxillary file.
Personally, I'd like to have both options, but I'd be happy with either option.
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