Placement in the tree should be under the TYPE of media, for two benefits:
-- Allow MC's complex UX to be simplified when only one media type is being used, same as the current Audio Only. This is a huge help to "normal" users (AKA family and friends). There should also be Video Only and Images Only modes, with all irrelevant menus and actions hidden.
Further, it would be helpful if a Playlist could (optionally) specify the proper "Only" mode for that particular list, or, "All" mode when the list (rarely) is a mixed bag. This Playlist setting would trigger MC to transform itself. For most users, the ideal MC UI would be just Playlists to choose from, properly named, perhaps with media-type icons and/or colors. Select the desired Music playlist, or Vacation Photos playlist, and MC would immediately optimize for that, hiding other stuff.
-- Organize by Consumption Mode, which is tied to Media Type, implicitly indicating how that media will be consumed (there are exceptions, sure, but how do must users do it?). Keeping actions beneath/within the media type because that is what most users think of first -- Audio, Video, Images. Notice I'm suggesting that "consumption mode" is a more important than "acquisition/source mode" for users. Line up each media type with how that media from MC is routed to the final output device to the user. Audio usually goes to amp+speaker (so the user turns it on), video to monitor or TV (so the user turns it on and has a seat), Images to monitor or TV but different context than Video (users steps up and looks closely).