When you tried having your iTunes folder shared, in the lw lib window, did you click open each of the folders & levels of folders (eg-album folders) to see if they could be seen in the lib win.? Most frequently I have people dwnlding from these folders. And there's lots of them arranged as you suggested via artist & album, etc. I suspect you didn't click open the (album) folders in the lib window. I have selected the main 'iTunes Music' folder as the 1st level folder.

Maybe you should go back to version 4.0.4 like mine! Hehehe