You need to bare in mind that Zen does a quick check to see if the file exists before it uses each product image, and the way PHP works, it doesn't just say "is image 123.jpg there?", instead it says "can i have all the files that exist in this folder please?", and it then checks the name of each one to see if the file it wants to use is in the bag of names. This is a PHP thing rather than a Zen written thing, but the point is......... if you have a folder with 2000 images in it, you're server will be incredibly slow. If you have 200 folders with 10 images in each, it'll be much quicker!
So the point is, we have all images in the IMAGES folder, but then don't be afraid to split files up into categories or groups. For a start, some search engines index the URL, so get a keyword in there, like "images/candles/church_candle.jpg".
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