Funny you should ask this right now, as I'm listening to some lovely music while I clean out some old digi scrap supplies! I just now made my poor PSE Organizer crash--I think I blew its little mind with all the deleting and moving and renaming and getting rid of folders within folders within folders (I never did that in the beginning and I wish I had!)...
I began organizing by separating kits, and now, a few years down the road, I'm cleaning up that mess! DON'T DO IT!!! Thankfully, I didn't do it for very long.
I have major categories in a main folder I named Digital Scrapbooking; Kits, Frames, Papers, etc. I always put kits together; the other categories are for individual types of items that come that way, ie, a collection of frames.
I think one modification I'm going to do is to break down my kits by theme, ie Vintage, Art Journaling, Birthday, Baby, etc. I have them now in one getting-too-large folder.
I use PSE Organizer for my supplies; I keep my photos in Lightroom.