Yeah, it seems Microsoft followed Apple's (and
Creative's) lead in using ID3 tags to sort music. Folder structure is just too complicated and not many people use it, unfortunately. What I'd suggest is to use a metadata editor such as MediaMonkey to find and update all your tags. Even if most of your music is just single songs, you can put them in their own albums, group by genres, or add playlists if you like to go that way. This will all but future-proof your music collection, and will ensure the best experience with your device.
The downside of this is of course that it takes time. Set aside a good chunk of a Saturday and just get this out of the way. Believe me, it's worth it.
P.S. I'm not sure what you're saying about the "genres only showing albums" thing. Can you describe in detail what's happening?