Nice extension! As for manual nesting, wouldn't it be easier if you'd just allow dragging the file onto another, with some modifier key (like Shift or Alt)? You would then be able to quickly arrange files in hierarchies in a visual manner without tediously selecting from drop down lists all the time.
This looks extremely like a more modern (Metadata, Generics,…) COM
Hmm. I could swear Microsoft already has something like that. It's on the tip of my tongue. Starts with dot and ends with 'ET'. And I'm sure there's an 'N' in there somewhere, but I can't quite put my finger on it.