By default, Microsoft Windows Media Player 10 is set up to preserve folder hierarchy when it synchronizes music files to a device. However, if a mass storage device has a capacity of less than 950 megabytes (MB), Windows Media Player 10 synchronizes music files to the root directory of the device instead of to the subfolders.
To work around this problem, follow these steps:
Start Windows Media Player 10.
Click the Sync tab.
Click the Display properties and settings button.
In the Display Properties and Settings dialog box, click to clear the Create folder hierarchy on device check box.
Click to select the Create folder hierarchy on device check box.
Click OK to close the Display Properties and Settings dialog box.
After you do this one time, Windows Media Player 10 creates a relationship with the device and stores information about the device in the Media Library. The next time that you connect the device, Windows Media Player 10 will use the stored settings.
Microsoft has confirmed that this is a problem in the Microsoft products that are listed in the "Applies to" section.