DON'T DELETE THE FOLDER...as painful as it is, if you don't want to lose any MORE media than you already have, you're going to have to have two copies of your ENTIRE LIBRARY. That's right, you can't trust your media player to keep track of everything, so YOU have to. Luckily, Apple has made a point of selling highly compressed audio and video files, so it shouldn't take up TOO much space...
A couple of other comments...number one, I have read SO MANY POSTS that say "oh, you must have moved the files..." STOP. If I NEVER see that response again, it'll be too soon. I HAVEN'T MOVED ANYTHING. I have not TOUCHED the songs outside of iTunes, and I even told iTunes to consolidate them in the hopes that allowing it to sort everything out the way it wanted would help. Long story short, IT DIDN'T. Songs are still disappearing left and right! Music from two weeks ago has ceased to exist! Number two, it's NOT just songs that were not downloaded from the iTunes Store, although those do seem to be the most targeted...iTunes has erased several music videos and songs that I purchased from the store. Luckily, I was able to re-download them, but since I've started using smart playlists, the loss of stuff like the original date it was added to the library and the play count has been extremely frustrating.
All told, if this ******** continues much longer, I am going to find another program to communicate with my iPod, and I may even stop purchasing music through iTunes altogether. Oh, and you want to hear the best part? I still can't figure out how to make Apple forget my card information, which makes me VERY nervous, since they obviously can't handle things too well...If I lose money because of them, there's no telling what I'll do, but there will be much blood shed in the name of righteous anger.