Sure, NTFS can easily handle what you suggest... However, as KingSparta mentioned, you may regret it from a performance point of view. The more folders and files you have, the slower they will display.
I organize my files into folders by genre first, then album name. My reasoning is that you tend to run into issues with tagging and renaming programs if you use artist names as folders. The problem is mainly with handling mixed artist albums. The tagging program generates a seperate folder for every artist on such albums and so it makes more sense to use album names for the final folder level.
As your library grows, this approach still will eventually lead to a huge list under the genre folder, that for some may become unwieldy; however, one can easily do what benn600 suggested (that is alphabetising with a,b,c... directories) when the time comes.
If you only listen to and collect a particular genre of music, then drop the genre level of folders all together.
Cheers,
dmp