Ah that's too bad. I was hoping to keep all my digital content in their specific PSV, PSP and PS1 folders.
I think folders will be wanted/needed soon enough. All games get a persistent icon for their live area, so even physical cards that aren't in the machine still have an icon. And at only 10 icons per screen that could get full very quickly - especially with apps and minis
btw, anyone think the headphone output is a bit quiet? Only tried it outside or in a kids play area (so a bit noisy) but I needed the volume on full to hear clearly