it is not the default way. the default way is that MyDocs folder is seen as "Nokia N900", the hidden .documents folder is seen as Documents, .sounds is seen as Audio Clips or something like that, etc.

This way Pictures application cannot find my pictures taken by the camera and if i select "default camera folder" from the filters above it shows no pictures even if my DCIM folder (which is normally the default camera folder) is full of pictures i have taken.

I agree with you that the default way is a bit dumb but the thing is set up to work in that configuration. This way it is actually dumber than the default way.