Can I batch convert images in a folder hierarchy?

Question

I can't seem to be able to create an Action or Droplet in Photoshop CS5 that will batch convert images in situ in a hierarchy of folders. In the Photoshop Actions you have to specify an explicit destination, and there's no "save back to the same place" option that I can find.
I used to be able to do this with ImageReady CS2, but Tiger is going to kill that. Help!

Answer 1

If you want to give it a try, paste the following text into a new file in ExtendScript Toolkit (part of Photoshop’s installation, Applications/Utilities/Adobe Utilities/ExtendScript Toolkit CS4 or /Applications/Utilities/Adobe Utilities-CS5/ExtendScript Toolkit CS5) and save it as a jsx-file into Photoshop’s Presets/Scripts-folder.
After restarting Photoshop the Script should be available under File > Scripts and can be assigned a Keyboard Shortcut directly, recorded into an Action, (in CS4 and CS5) be used in a Configurator-Panel or started from ExtendScript Toolkit directly.
// 2011, use it at your own risk;
#target photoshop
if (app.documents.length > 0) {
// get document-path and -name; thanks to xbytor;
     var myDocument = app.activeDocument;
     var myDocName = myDocument.name.match(/(.*)\.[^\.]+$/)[1];
     var myPath = myDocument.path;
// save for web options;
     var webOptions = new ExportOptionsSaveForWeb();
     webOptions.format = SaveDocumentType.COMPUSERVEGIF;
     webOptions.optimized = true;
     webOptions.colorReduction = ColorReductionType.ADAPTIVE;
     webOptions.dither = Dither.NONE;
     webOptions.quality = 100;
     webOptions.includeProfile = true;
     webOptions.matteColor = new RGBColor();
     webOptions.matteColor.red = 255;
     webOptions.matteColor.green = 255;
     webOptions.matteColor.blue = 255;
// export;
     myDocument.exportDocument(new File(myPath+"/"+myDocName+".gif"), ExportType.SAVEFORWEB, webOptions);
Edit:
The Script could be recorded into an Action.
It would also be possible to create a Script that offers a dialog for File- or Folder-selection and subsequently operates on all selected/contained files of specified formats, but that would be a different approach from the Droplet.