I think it will greatly help my galleries, which are very very large, but you're right, sub-albums can get confusing.
Try to use them sparingly, and define your albums well. Only use categories when it makes sense, like for a certain category, or a certain vacation. It's up to you to organize effectively.
In ZP2 I'm planning on more organizational help, with the use of tags, groups, albums and subalbums, and more. Basically any image from any source should be able to be included in your gallery. You can have flickr images in one group mixed with images of the same tags from your own web space, and images from a completely different server in another album. This is way ahead dreaming of course... I just like talking about it...