16gb is not enough for me, even though that's what I have. I would use my 4gb for some stuff if Sony wasn't stupid and rearranged everything when I switch cards. I haven't tried that since the firmware update so I don't know for sure if it still does that, but I'm sure it does.
It should leave all the icons there in the cache, even if I switch cards. They also need an indicator of what games are on the card you have (or don't have) and what game card is in your Vita. For another time, I guess.
Yeah 16GB will let you down eventually

And absolutely...that has to be fixed, not just icons though, everything!. Forgot to mention I tweeted Yoshida about folders in next firmware update and he said he hopes so too...although he may have said that after 1.8 as well lol, don't fully remember.
Have fun Caleb.