It's really up to you, and how you want to navigate them. Remember that it's easy to change things around, try it out for a while, then change it again. Eventually you'll settle on a system that's right for you. The point is, experiment until you've found something you like.

Personally, I've got all my artists in the root, with their albums as subtrees of those. I prefer to keep the tree as flat as possible, so that I don't have to navigate anything too deeply. For instance, I don't have any genre trees at the root because I never bother sorting anything by genre.

I also have special-purpose playlists and mood playlists at the root. These are surrounded by parentheses so that they appear first in the playlists menu. So my playlist root tree looks something like this:

(Demo)
(Humor)
(LAN Party)
(Low Key)
Aimee Mann
Blues Traveler
Brian May

Etc.