I do it the way you'd like. I have sub folders for everything. I have four folders for every direct person in my tree. I stopped using FTM, but when I did use it I didn't have any problems with the program going into the sub folders.
The big problem with the backup and allowing it to make a backup of the Media folder is that it will take EVERYTHING in that folder and make a back up. I have tons of photos and such that I never connected to my tree, but they were all there so I knew where to find them. When it would make a back up the file would be huge, as in 3-4 gigs.
Since I make monthly backups then I didn't want/need FTM to do it for me and if it did then I couldn't put everything on to one DVD.