Hey Zoom, as you probably figured out already, MC can rearrange your upload folders based on the source filepath or based on the tag information (f.e. Arist/Album,etc., which is pretty neat function). If you really want to keep the source path, I suggest to move everything to drive C:\.
You don't have to synchronize the entire media liabrary, you can limit the action down to several playlists (configurable in tools/ options/ handheld/ configure transfer options.... You may also want to untick that Auto-delete track option, so that MC will only transfer new tracks from your library and will not delete any tracks from the handheld.) I guess you know how to create rule-based smartlist in MC. Also check out "Larry's Ipod Notes" Sticky topic on this forum which offer pretty good hints how to manage your files on handheld.
I have indeed noticed that some of my MP3 and OGG files could not be synchronized to iRiver with this latest MC 11 release. I would like to do some more research next weekend before raising this as an issue to Steve. I guess though it is normal that jpg and txt files are not synchronized. I have tested that when you manually copy them to iRiver they don't get delete by synch procees either.
hope this helps.
Alex