1. Videos needs to go, or at least be buried as 'file system' 'explorer' or what ever, it should never be needed in day to day use.
Videos dosen't need to go. I think we need more "types" of videos. I have several categories of videos that i don't want in a library. Mostly home videos and small clips form the internet. But I also have quite a few documentaries that are not scrapeable.
Home videos (folder structure)
Clips (folder structure)
Documentaries (folder structure) (some may be scraped, and maybe some library mode)
These should only appear if you have something in the corresponding category.
I'm not sure if my idea is the best but i think you should be able to choose what content is in the folder (same menu as add source). And then xbmc should by default put movies and tv-shows in the library. I'm not sure where it would be good to find this menu. Probably is settings among other places a good idea.
On an other note i can completely agree with that the library is quite hard to grasp. I used xbmc for ages without using the library because i preferred the folder structure i was used to.