[eluser]ntheorist[/eluser]
yeah i managed to work in nested subfolders as well, i agree for larger and cms apps single level directories aren't very practical. Doing a search for controller subdirectory in the forum demonstrates the idea's popularity.
I can see how the situation you describe with multiple developers could get sticky with core changes. Though In CI's case they haven't made core upgrades for almost a year, which speaks of its simplicity – it just works for most people.
the next CI upgrade will prolly be a major one, something you might need to install from scratch anyway. Many agree that if it comes it will be on the heels of EE 2 - when that will happen tho exactly remains a mystery but it's picking up steam and trust me, i'd love to be able to ditch core hacks in favor of a new revision with more flexibility.
cheers