Folders under projects & folders inside folders

I'm just curious to know what people think of using folders/ they appear to be flexible.
Does a folder under a project function exactly the same way as an album under a project?  
Also, can you put a folder of projects inside of another folder without any problems?

Thank all of for the earnest advice!  I may be a bit further along with this than I seemed.
I just took my entire library and reordered it, with everything moved to projects, deleting all albums, (I did not realize before that they are kind of secondary to where I'm at right now, organization-wise)
The projects also now reside in folders, which are just there to refer to what's inside of them.  I suppose I may reorder this by the year one day, but for now am happy with big broad categories and then inserting albums to projects during future use.
Anyway, there are some questions I had along the way.  I'm only going to post the ones that seem like they might be easy to resolve... hardest question first:
What is the best approach for putting the same image from one project, into several (or into albums, too), without completely confusing myself down the line?
(I'm talking editable master or just a virtual "copy") I'm concerned that I won't be able to easily ID what's a master and what's a copy at first glance, and will have to start digging.
Is it possible for Aperture to lose track of a master file location if I go in and start changing file names within the Aperture app?
What the heck does this message mean? (and should I accept it?):
"Reprocessing photos allows you to take advantage of Aperture's new adjustments and imaging technology. You cannot undo his action."
Does anyone recommend "Vault" as opposed to, or in combination with, an old fashioned hard drive backup? (I use the latter)

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