How to create album (or folder) within others in iPhoto?

I am a recent convert from Windows.  I used MS Digital Image to manage my photos.  I could create a folder, add sub-folders underneath, and even sub-sub-folders if I wanted to.  And I did.  E.g., I could name a folder "vacation 2009" and create sub-folders under it for each place visited.
I can't seem to do this in iPhoto.  When I migrated my photos over to iPhoto it totally trashed the existing folder heirarchy.  It is a mess now!  I'm trying to rebuild the tree, but iPhoto is not cooperating.  I can create a folder or an album but it won't let me create a SUB folder or album.  It just drops it under the same tree.  I guess it thinks it is smarter than I am or else it's one really lame bit of software.
I even thought I would try to create a folder/sub-folder heirarchy in Finder, but Finder can't even "find" my photos!  I'm REALLY ticked. 
Anyone got a handle on this?

a couple of things
You are thinking of a file management system - that is not what iPhoto is
iPhoto is a database and if you tag your photos you can find them instantly using the search window in the lower left or with smart albums
For the organization you want you use folders (folders hold folders or albums) and albums (albums hold photos) - events are best left as just buckets of date organized photos
You do not use the finder - doing so can damage the iPhoto database - use the many build in photos access procedures in the OS - <a href="http://web.me.com/larryhn/iPhoto_08_(version_7.x.x)_FAQ/Accessing_iPhoto_Photos. html"> click here for a discussion on the many correct and safe ways to access your iPhoto library photos.</a> 
different people use different strategies but I go with the old j-school 5 Ws - Who, What, When, Where and Why - I use faces for who - when is automatic form my camera and since I have a GPS camera where is automatic too - and I use key words for what and why - so I can instantly find any photo - want a photos of my wife, daughter and dog in New York in 2006 - or all photos with elephants in them - instant - try that with a file based system
You need to learn iPhoto and change your thinking from managing files to managing photos - the old tutorials help (although some commands have changed location) - and it would be a worthwhile investment of time to take the iphoto tutorials - http://www.apple.com/findouthow/photos/ - they are very helpful and will save you a lot of time and frustration.   --  and there are videos under the iPhoto help menu ==> iPhoto help ==> videos
And you may want to start over with your old folder structure as a starting place - to do so just quit iPhoto and drag the iPhoto library to the desktop and launch iPhoto creating a new library - make sure the iPhoto preference to split items imported form the finder into events is not checked and then drag folders to iPhoto - it will create events matching the folders
LN
LN

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