Problem with icloud match

Alright this is ridiculous.

I have so many music files on my external hard drive.

I sync all of them with itunes and itunes would match them up with itunes match.

Now recently I wanted to select certain songs to synch with my ipods in the house for 4 individual household members, guess what i found?

Some of my music files disappeared!!!!

i go into finder to see whats going on in my external HDD

Well well.....

My tines files in certain albums have turned into folders....

thats sooo ********!!!

Look at the pic inserted (from win7 pc on network)

And i have my itunes set to manage my music, according to albulms and artists, etc and to download artwork.

What is itunes doing to my music files???