Since I had my iPod first, I haven't gotten around to putting the music on my iPhone. But then, I'm not walking around with earbuds in my ears either, so I keep them separate. As far as management, I do use iTunes, and you can arrange any way you want. I have lots of onesies and twosies which display the albums, but it doesn't confuse me, as I know I don't have the whole album. I arrange by artist, not album, and it works best for me. I hated the most recent update, but got used to it after a while.
Steve