I also find it strange that it can handle 60000 files but only 500 folders. 120 files/folder without any allowance for Artist\Album\Track etc?
I don't see how iTunes can make it any better. It still needs to store the files. Sounds like someone has just said "iTunes" since that magically fixes everything....
Sure about the 500 folder limit? Maybe just give it a go? Thursday's not that long to wait to find out.
Worst case do you think you'd have 500 artists?
In my store I keep it like this:
A\
Artist 1
Album 1
Artist 1 - Album 1 - 01 - Trackname.mp3
Album 2
Artist 1 - Album 2 - 01 - Trackname.mp3
Artist 2
Album 1
Artist 2 - Album 1 - 01 - Trackname.mp3
B\
B Artist 1
through
Z
with special "Comedy", "Audiobooks" and "Various" at the top levels.
In my case I could probably just get away with removing the Album subdir and dropping one artist's tracks all in one directory. That's assuming of course the Volvo is smart enough to sort alphabetically and doesn't leave them in file system order.