The drive appears to look in all subdirectories, so you can create and name them whatever you like. It does not change the originals. The indexing is only done once. It does not matter what directory names are used, the FS will find any new photos by itself. It takes up to 20 seconds for each shot from a 3 Mpixel camera.
Smaller shots are quicker.
In this mode, the only way to change the originals is to go into the edit mode or the delete album mode. You don't really have to worry about changing the originals by accident. It makes three pieces of data when it indexes your shots. A very oversharpened, color boosted 640x480 JPEG file. This file is what the FS actually shows on the screen.