My understanding is that it doesn't matter whether all the games are in one "games" folder or are in several sub-folders of the "games" folder (as long as none are on the root of the card). The lagging is generally caused by a combination of FAT32 and a large number of games in the menu. While other carts organize ROMs into folders and scan the current folder before showing the game list for that folder, the DSTT always shows all ROMs that are on the microSD card in a single list, and when that list is too big it lags during scrolling.
Unfortunately, if you're already using FAT16 there's not much you can do to speed things up other than delete some of your games, although some have reported speed-ups using the Panasonic formatter to format their microSD card. Maybe someday the DSTT team will actually update the menu system and fix some of the problems, but I wouldn't hold my breath on that. So far they've been good about loader updates, but haven't made a single fix to the menu system that I know of.
-Bri