The two folders are due to the recent move from BBeB format to Epub format. At least that is what it appears to be on my upgraded library software. I think the application expects and needs them to be that way.
Just looked at mine again. The Library under your user is what the App is using to store it's preferences for browsing the Sony store I believe. It should remain there.
I think if you start moving things around in your D&S area you are going to break something. Probably best to just let it use the defaults.
