Further to my discussion of folders last week I thought some rules of thumb would be useful. Google have published their thoughts on this in one of their Google Earth outreach tutorials, however, their tutorial assumes that authors know how to write KML. I don't think everyone has the time to work out KML so I've sifted through their tutorial and added some of my own thoughts.
The basic rules are here to keep a good balance between having a rich resource with enough elements but one that is not overly large or complex in terms of structure.
1. No more than 3 levels of sub folder
2. No more than 4 content folders in the project. However, you can have 1 introduction folder in addition.
3. No more than 5 items (placemarks, overlays, polygons, sub folders) in each folder or sub folder.
This would seem to limit you to 4 folders with 5 subfolders and 5 elements in which is 4 x 5 x 5 = 100 elements in total. In certain cases this won't be enough but what I suggest is that you can break rule (1) if the subfolder is locked so that it cannot be opened, similar to my Picture Frame concept.