Yes, the power of flattened folders can really make sorting them "nicer", especially if you have a lot of subfolders (you just set the parent folder to flattened). I also sort mine by worlds; what parent folder I flatten depends on how many characters are in that world. Flameverse is huge, so it's the countries that are flattened, not the global (or even continental) folder. But for my current batch of mains - there's only like ~70 of them distributed across 26 folders, so they get to sit together in an entirely flattened folder. It's fun to see the entire cast at once!
EDIT: oh I just looked at your Tumblr... it's a tiny, tiny world - I drew that pixel art you have on your pinned post!! :D I'm so happy to see you like it!