Same issue here. Fourteen albums just for pics of my girlfriend, each containing a single photo. Doesn't even show some of them. My list went from 127 albums to 1,112 in seconds... iPhoto is fine itself. Maybe the XML database is messed up, I think that's the one that external programs grab at because it's easier to parse than iPhoto's library. Fix this please Apple, I didn't spend $3k on your gear just to be surprised with this "little" bug!
EDIT: Before anyone asks, yes, I have tried all the suggested solutions above in the previous posts. I do not have a backup of everything (no Time Machine setup on this machine yet, is new), just backups of my music, docs and photos themselves. I have tried restoring them as well, and deleting caches to no avail. 9.1.3 did NOT help me sadly.
EDIT2: A friend of mine (with Time Machine) reported that restarting after the update, then starting iPhoto THEN iTunes seemed to help it apply the patch 100% of the time, whereas just opening iTunes right after the patch installed rarely worked.