oooh yes ... thousands would indeed do it
there is a database on your disk called either the File allocation table (fat - FAT/FAT32) or master file table (mft - NTFS)
it's a list of the starting reference of every file in every folder.
when it gets thousands of files in a folder (or nest of folders) it takes a lot of time to search the list for the file you want... even if its not in the offending folder
if the disk is your system disk (the one with windows) and is fragmented as well ... you are in real touble
If the files are important - stick them onto CD or DVDs
do it twice to be sure ... stick them on a second hard disk as well (usb?) .... but get them off your system disk.
PCs were originally built round databases .... one or two enormous files ... almost totally filling a disk are far better than thousands of files half filling it