Organization
Before you get started you should decide on your file folder structure. Would you open a file cabinet drawer and drop everything in one big pile? You don't want to do this with your store's file structure either. Create folders you think you'll need and add to them as you find the need for more.
Images
Decide on a system before you start. This will save you time later. For example create all thumbnails with a tn- prefix or _sm suffix.
Try to use either gif or jpg instead of both, but if you must use both try to limit it to gif for full size images and jpg for thumbs or vice-versa.
Less Is More!
You do want to keep organized but try not to go too crazy. Do you really want to deal with having /images/products/here/there/and/every/where/thumb/smile.gif? Remember that less is more. For example: If your using a thumbnail prefix or suffix you don't really need a seperate folder for them. You can store them with the full size images.
Our System
Every store and store owner will be different but our setup for example is :
Images:
We have a seperate folder for each mfg, another folder for catagory images and one more for all design aspects of the site (bullets and other graphics)
Thumbs:
tn- prefix on thumbs, all thumbs placed in the same folder as the full size version of the same image.
Product Image File Names:
We name all image files (thumbs and full size) using the product part numbers.