This is interesting, Linc. I've been using Mac computers since the Macintosh Plus and Macintosh II around 1987, at least four years before today's college grads were even born. Every Mac I've owned since then has become a direct descendant of all the previous ones combined.
The earlier Macs I owned were set up for a single user. No log-in was required. All the files were in one place on the hard drive, and I never lost track of them. When I upgraded to newer units, I followed whatever instructions were provided for file transfer. Then somewhere, or somewhen, Macs were made for multiple users, with log-in names and individual home folders. That's where the trouble must have started for me. The Migration Assistant either allowed me to put the files where I was accustomed to finding and working with them, or it did that on its own. I saw no warning that my customary arrangements were no longer suitable.
My two active computers are on different versions of the OS.
On my MacBook Pro (Snow Leopard), the sidebar contains DEVICES, which contains the icon for the MacBook Pro and the icon for Macintosh HD. Inside the MacBook icon is a duplicate of the Macintosh HD icon and an icon for Network.
Below DEVICES is PLACES, which contains the house-shaped HOME FOLDER, the Desktop, Applications, and about two dozen other items which I assume are aliases for the folders and apps I use frequently.
Clicking on the HOME FOLDER in PLACES opens a window that includes the Desktop again, along with Documents, Downloads, Pictures, Movies, and a whole lot of miscellaneous folders that arrived there somewhat mysteriously. It also contains an Applications folder that contains an Akamai folder with a few items inside. The main Applications folder is in the Macintosh HD startup folder where I assume it belongs. This startup folder also contains a lot of working files that apparently do not belong there, but should be relocated to the home folder, according to your comment. Right?
---NOW, to the iMac with the Lion OS:
Its sidebar suddenly has lost everything except DEVICES. The space for PLACES will not accept the Desktop, Applications, and other aliases for frequently used items. I haven't tried to log out and back in as another user, to restore the sidebar functionality, because it seems to involve starting all over, and I'm reluctant to do that.
My greatest fear is that Adobe InDesign won't be able to locate all the linked graphics used by advertisers in the directories I publish. There are at least a thousand of those links, scattered in dozens of places, and I don't want to put them where neither I or Adobe can't find them. It would jeopardize my entire business.
I just wish I could operate as a single user again, with files where I can find them. I've never felt comfortable with Apple's system of files within files, like Russian eggs. When you've got 26 years of files (well, not quite -- many of those are gone), but thousands of files nonetheless, the system of hiding them within so many vertical layers gets very complicated. I never use iPhoto for just that reason. (I don't mind when the folders are on one desktop, regardless how many addirtional folders are within those folders. It's when they're in different USER places or otherwise farther removed from their traditional places -- that worries me.
I'll be interested in your take on this, but I'll understand if you can't spare the time. I'm marking your responses as helpful, for what you have offered already.