Does it matter if all of your pages or in the root folder?

[jseamless]

For origination purposes it makes sense to place some pages in folders. Will those pages be indexed just the same if they are linked properly?

[jimshu79]

Yes. Although its not the best practice, it will work just fine.

[encyclo]

The general advice in this situation is to keep things as close to root as possible, but retain a compact but logical directory structure. Personally, I would avoid going more than 2 directories deep, but that depends on the quantity of information on your site and the way it is categorized.

Don't forget to use keyword-rich directory and file names.

[tbear]

I'm pretty sure that it is irrelevant as far as SEs indexing your site is concerned.
What does matter is the link structure!
That is to say, I keep things as logically stored on my server as possible (for a sometimes illogical person). Everything in the root folder would not be very manageable for a large site. However, files are never a couple of clicks away from my index page, thus being easily indexable.
I wouldn't normally need more than a couple of layers of folders anyway, mind you.

[jseamless]

I really appreciate the insight here!

[DougW]

Does having a large (over 5000) pages in a directory cause any slow-down of the server (dedicated linux) in fetching the pages? If there a number of pages in a directory that should be considered a max?

[tbear]

Ahhh, I never had a site that large to play with.. :)

[Llama]

well you shouldn't have 100+ links on a single page.

Having keyword-rich directory and page titles/urls can help your ranking. Look at Google; they bold the keywords in the page URL.