The new songs with the new genre in the new folder did import into the library just fine.
The only problem is that this one new folder - unlike ALL the other music folders - created new artist folders for each artist in this new genre folder.
And I have that preference spot checked where you can opt out of having I Tunes create their own system of music files...again...it's just this ONE folder....really weird.
Almost sounds like you had a tagging issue - could this have happened when you retagged them as Genre 'Urban'? iTunes itself doesn't create folders external to iTunes, especially if it's not copying the files to the media folder .. and especially not during an import / add to library. Again, the index is a flat file - it doesn't store anything except a catalog of what's where.
Looking at my iTunes right now, under Advanced, there are 2 things that I do not 'check' (actually on this page, only 1 thing is 'checked' - Enable full keyboard navigation). Things to note on this page:
iTunes Media Folder location - is this the same path as where your music is? This could be problematic if it is. Mine is not. Mine says C:\...\...\My Documents\My Music\iTunes\iTunes Media. I have nothing in that location.
Keep iTunes Media folder organized (places files into album and artist folders, and names the file based on the disc number, track number and the song title) is not checked - this sounds something like what you describe - but this would ONLY work if the path in the iTunes Media Folder location (specified above) was the same as where your music is.
Copy files to iTunes Media folder when adding to library is not checked.
Having said that, when I buy something off of iTunes, it does place them into artist / album folders. I then use a tag editor to remove all the info I don't want, bpm scan, etc and manually move it to its new home in my library - after that, I go to iTunes and do an Add To Library.