I can't say enough for Emulaxian
http://3darcade.mameworld.net. To get the full effect of Emulaxian with their 3D first-person walkthrough arcade room you need a better pC thatn you have, but it also includes a "listbox" format which allows you to scroll through the games - each game you get to it also shows the associated cabinet and screenshot next to it so you can see the game too. You just use your joystick to scroll through games, then to lauch a game just hit one of your buttons (defaults to your player 1 start button). No commandline interface necessary, it does it all for you.
Even though my PC is beefy enough to use the 3D arcade, I normally just use the listbox. Also, the front end can rotate itself - so it can appear in one direction for the games you will use while sitting at one side of the cocktail cab, and rotate 90 degrees for another side, etc... And it also is made in a folder/subfolder type fashion as you describe. I have 3 rotating control panels on my arcade, and a rotating monitor - so I actually have 6 "folders" of games for the different configurations my cabinet can have - like "control panel #1 - horizontal games", "control panel #1 - vertical games", etc... A particular game can appear in more than one folder if you like. Very easy to set up too (looks scary at first, with all the options, but read their tutorial and you'll be all set.