There are plenty of discussions about this but in a nutshell DLNA supports almost none of the common encodings you see folk want to use. As to the folders, you can see it is again limited to short names and not as many files in a folder as other (smarter) devices.

Remember this area is well discussed and folk try and try to "find a cure" and come away mad and bruised too many times. You might too.

In short, very few encodings work. And not one person I know has re-encoded their library.
Bob