Folders vs. Metadata is an endless debate in SharePoint world. I published a number of articles on the topic myself. Here are the links to some of them:
- 12 reasons folders in SharePoint are a bad idea
- Stay away from folders in SharePoint
- Introduction to SharePoint Metadata
I always wanted to create a slide deck to help my loyal blog readers to visualize issues with folders and the benefits of metadata. I finally got few hours to create such a slide deck. You can even download it from SlideShare, if you wish. Enjoy!