For what its worth, I have mine as follows:

Alpha
-- A-C
-- D
.
.
.
-- R
-- S-U
-- V-Z
(with Artist/Album/Track underneath)

Artists
-- Artist#1
------Album#1
etc, for all artists

Genres
-- Genre1
etc, with Artist/Album/Track underneath

Lists
-- List1, etc
for "mood" lists, or "people" lists

Empty
an empty playlist to use when "starting over" when using Palantir to queue playlists. I "play" this playlist when I want to start with no running list and add from there.

Books
-- Artist/Book/Tracks
for audio books, seminars, etc.

As has been mentioned by others, the beauty is that tracks are potentially in multiple lists. I love the "Alpha" when using the player without the remote (which I usually do while in the car).

Jim