Whatever the system is, foldering or labels, it should not break the metaphor of 'folders' as implemented in other systems, including file systems. Gmail does break this metaphor and not with something superior from an ease of use perspective. For example, in the folder scenario, it's one click to see everthing in a folder. Can you say the same for tags? Granted, assigning multiple tags to a single item can be useful, but also confusing and potentially contradictory.
I'm with a folders interface, even if as a metaphor for 'tags'. Or, an improved tags to make them more similar to folders...whatever...just make them easier to use, more informative at the initial level, and quicker to navigate.