Master plan for organizing in iPhoto 11

I have 12, 000 pictures. I have not organized this well and am trying to do it right.
Suggestions please:
1. What is the best way to use iPhoto Libraries? Is it a good idea to have many Libraries so that they are less overwhelming, unruly, and too hard to deal with corruption? Maybe have one Library for "Early Family years", one for "geneology", one for "past 5 years" etc?
2 What about within each Library? Is it best to use Events for dating a group of pictures as if it returned to you as a roll of pictures developed for certain dates?
3. I don't see Folders in iPhoto 11. Do they still exist? What is the best way to use Folders? Maybe have a Folder such as "Favorites" or a Folder for "Desktop pictures" attempting to organize by use or theme?
4. Finally, what about Albums? Should I be conceiving Albums as a way of putting all my pictures in an Album for a certain year, or a certain "event" such as trips or birthdays?
What is the best way to start fresh? I need help with a concept of how to organize and move forward.
Thanks

With all due respect to Terrence, 'making it a project, working on it every week' is an awful idea, impossibly daunting, and unlikely to ever get done. How is that any easier than sorting through shoeboxes upon shoeboxes of prints like our parents did (I mean, never did)?
Remember a filing system is like a sewer: what you get out of it is a direct result of what you put into it. It's unlike the shoeboxes because this is a system that makes searching of the "shoeboxes" possible. If you lack the application to develop a filing system, then you're only way of searching will be by scrolling.
but is there a way to do mass-tagging? I'm thinking of quickly selecting, say 1000 pics and type  'Alyssa' and 'Paris', and they're all done, instead of looking at each one by one to add the tags..
Yes. The keyword is added to all the pics selected.
- Where are the pictures stored? (directory structure).
In the iPhoto Library. That's in your Pictures Folder. Want to look inside? Go to your Pictures Folder and find the iPhoto Library there. Right (or Control-) Click on the icon and select 'Show Package Contents'. A finder window will open with the Library exposed.
Standard warning: Don't change anything in the iPhoto Library Folder via the Finder or any other application. iPhoto depends on the structure as well as the contents of this folder. Moving things, renaming things,, deleting them or otherwise making changes will prevent iPhoto from working and could even cause you to damage or lose your photos.
To use another editor with iPhoto
You can set Photoshop (or any image editor) as an external editor in iPhoto. (Preferences -> General -> Edit Photo: Choose from the Drop Down Menu.) This way, when you double click a pic to edit in iPhoto it will open automatically in Photoshop or your Image Editor, and when you save it it's sent back to iPhoto automatically. This is the only way that edits made in another application will be displayed in iPhoto.
Note: this is really important. Iphoto is a database. You never directly access the files in the Finder.
There are many, many ways to access your files in iPhoto:   You can use any Open / Attach / Browse dialogue. On the left there's a Media heading, your pics can be accessed there. Command-Click for selecting multiple pics.
(Note the above illustration is not a Finder Window. It's the dialogue you get when you go File -> Open)
You can access the Library from the New Message Window in Mail:
There's a similar option in Outlook and many, many other apps.  If you use Apple's Mail, Entourage, AOL or Eudora you can email from within iPhoto.
If you use a Cocoa-based Browser such as Safari, you can drag the pics from the iPhoto Window to the Attach window in the browser.
If you want to access the files with iPhoto not running:
For users of 10.6 and later:  You can download a free Services component from MacOSXAutomation  which will give you access to the iPhoto Library from your Services Menu.
Using the Services Preference Pane you can even create a keyboard shortcut for it.
For Users of 10.4 and 10.5 Create a Media Browser using Automator (takes about 10 seconds) or use this free utility Karelia iMedia Browser
Other options include:
Drag and Drop: Drag a photo from the iPhoto Window to the desktop, there iPhoto will make a full-sized copy of the pic.
File -> Export: Select the files in the iPhoto Window and go File -> Export. The dialogue will give you various options, including altering the format, naming the files and changing the size. Again, producing a copy.
Show File:  a. On iPhoto 09 and earlier:  Right- (or Control-) Click on a pic and in the resulting dialogue choose 'Show File'. A Finder window will pop open with the file already selected.    3.b.
b: On iPhoto 11 and later: Select one of the affected photos in the iPhoto Window and go File -> Reveal in Finder -> Original. A Finder window will pop open with the file already selected.
If something ever goes bad, or I change my mind, I'd like to just copy everything from a root point.
If "something goes bad"
That's what your back up is for. As you can see from looking inside the Library, there's nothing done to the files, they are just stored.
or I change my mind,
That's what File -> Export is for. Apps like iPhoto2Disk or PhotoShare will help you export to a Folder tree matching your Events.
Can you change the size of a bunch of pics all at once?
Yes. In the export dialogue. You can export and resize in batches.
Regards
TD

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