Like Patch and other, I use one large music folder with all my tracks properly tagged, the I created playlists by genre. I also have "Added Today", "Added This Week", and "Added This Month" smart playlists to help me find my new stuff quicker.

The initial setup is very time consuming if you have a large library because you have to make sure your tracks have the correct tags, but after that it's a breeze. Whenever you get new stuff you just dump it into your music folder, fix the tags if needed, and then let iTunes sort it out for you.