Hi, I created a music folder inside the sd card and placed the files in there. I don't think it matters what folder the music files are in. I believe the player can scan or the User can specify the location. Hope it helps!
Phone vs sd card does matter...just found out as my phone was crashing and lost all my playlists and most of my photos....all because I was saving directly to the phone.(just spent 1.5 hrs on the phone with a very helpful Verizon tech support who helped me clear my caches....when I went to the store they automatcially told me I would have to reformat my SD card which was sending shockwaves through me). The task before me is to figure out how to save to my SD card (perhaps investing in a larger SD Card) or store on Amazon MP3 player or a Cloud service through Verizon or Amazon or another. For music it might be easier with the Amazon Cloud since music I have purchase from Amazon is already on their Cloud