BASIC set up choices...

Hi, I'm looking for the most BASIC of instructions on set up..... I think I know the answer and there seems to be posts 'about' this but I want clarity.
I have iPhoto '11 and PSE 10. I want a way to organize my photo's within iPhoto. The main reason I like iPhoto is the way it integrates into mail and other Mac programs... I realize people hate it, and, I agree... it's hardly ideal. However.... I tried importing from iPhoto as was available in the PSE menu and seemed the most logical and simple way to go.
I was horrified to learn that in fact, PSE had created another 20GB folder on my hard drive with all the photo's on it.... I don't want 2 copies of the photo's. I want a well organized iPhoto Library...
I've searched around these forums and help files, but I can't seem to get a direct answer or explanation of this. It's so frustrating and annoying that a basic set up feature does not seem clear. In preferences there is a parameter under Preferences> Files> Saved Files> with a Browse button able to point to a nominated folder..... I was under the impression I could make this the iPhoto library??... but it's not available...
It doesn't seem that I can do what I want to do in the way I want to do it.... but perhaps my logic is wrong... I thought having the word 'organizer' in the PSE would solve problems, no cause duplicate files... 2 sets of photo's is not a solution.
I'm guessing I need to import into PSE and delete the iPhoto library?.... but can I still use iPhoto then?
I'm really confused..... I've deleted all of the photo's from PSE by selecting all and deleting... then I've made sure the Adobe folder 'Organizer' is empty.... but I can still see photos??......
So it IS seeing my iPhoto Library?.... will any changes I make affect iPhoto?.....
MacBook Pro - Mountain Lion

Thanks Barbara, for taking the time to respond with good advice....
while option 2 seems to be the way to go to keep using iPhoto, it seems to be more aimed at editing and not so much organizing?... not too keen of going into the exporting/importing business.... (sounds like George Costanza....)
iPhoto really is pretty lame when it comes to organizing the library of photo's isn't it?.... I've heard of 'Light Room' which has been recommended by a friend.... and also seen another product $$.... iPhoto Library Manager by fatcat software, but reluctant to fork out for something else that doesn't quite work.... not sure if anyone can recommend these products?
So, if I wanted to make PSE the default photo app.... I'd need to....? export all photo's then import to PSE?... or just do the menu 'import' using PSE then delete the iPhoto library?.... I wonder how this affects my time machine which backs up to time capsule?....
What's your experience with PSE organizer? Does it do everything you want?.... is it the ants pants?.... lol....

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