1. No, you do not want a character set for each individual character. If you do that, the Slots will not match up and your window layouts will not apply correctly
2. Your characters go in your window layout according to their Slot in your character set
3. No, you want exactly 1 folder for performance reasons. The only legitimate reason for using multiple folders is to have multiple configs -- in other games. With LOTRO, your config is put in your Documents folder so as far as I know, having multiple LOTRO folders will do nothing but harm your performance.

I'm not sure why you get the "logon server is busy" message, though. Creo and Nathanastack in the #isboxer chat room might have information that can help you on that one (LOTRO players; Creo is usually around, Nathanastack usually isn't). As far as being in the wrong location for the window layout, sometimes this is just a startup issue where if you switch between the windows it will go to the right place after that. So before you change too much, be sure that isn't the case since that'd be harmless