Hi Deep_Blue
Library structure Pros
The distribution is easier with libraries.
It is also easier to keep track of which files are needed for a specific project.
It makes your computer less cluttered than seperate VI's.
Library structure Cons
Version tracking and source code control can be harder, because the source code control can't tell what files have changed. Almost all professional source code control software can't handle Labview easily, it has to store the enitre binary file each time it's saved, so your CVS system will fill up quick.
You can't add other type of files to the library, so if you have .dll's, .ini files, or even user documents, they are on their own.
If you have a sub-VI that is it's own file, and another VI with the same name in a Library you can't tell which one loads
Directory structure Pros
Like someone else said, you can sort your VI's by type (custom controls, analog in, etc.)
You can tell which files changed WITHOUT OPENING THEM simply by looking at dates in Windows explorer, which is usefull.
Directory structure Cons
It does take a lot of work/discipline to sort the vi's, because sometimes VI's don't fall into neatly defined categories.
I use mainly seperate VI's split into folders, and only use LLB's for distribution and source code control (I use a homemade LV based source code control).