Simply put it allowed me to finally view thumbnails using the media server. Before this my wdtv live would only display that generic greyish colored camera icon. My entire collection (which is mostly movies) are set up in their own folder. Each folder has the .mkv file along with the Folder.jpg. Each Folder.jpg is the thumbnail for that specific movie.
Here is an example using the first 3 movies listed alphabetically:
Y:\Videos\Movies(500) Days Of Summer
(500) Days Of Summer.mkv
It looks like it is set up a bit different than the tree you mentioned as I have a folder set up for each individual movie.
Let me know if you need any more information.