I am bringing this up again because after upgrading to Jellybean, I think this is fixed!
I have my music in folders as mentioned above in the original post. I used the stock Google Play Music app and when I went under Artists, it just listed the Album Artist and not all of the track artists as I was describing above. I downloaded the trial of Poweramp and Doubletwist and they both did it the old way by listing all of track artists rather than the album artist. Was this fixed with the Play Music app recently? Has anyone gotten any other players to work by just showing the album artist?