you do have to setup a master domain, which is the domain from which you can login to your control panel. This domain doesn't have to be used for anything, it's just the domain to access your account i.e. cPanel or mail, etc.
Then from there, you can setup add-on domains, which are just sub directories behind the scenes, but to the outside world, each domain is its own website.
If you login via the master domain, you can browse to any of the add-on website's files via FTP or the built-in file manager. So even with a master domain, you can still "utilize folders for each of [your] websites which [is] a quick and easy way to update each site". Now, if you login via FTP using the FTP account for one of the add-on domains, then you'll only see that domain's files.
That said, any host that offers unlimited add-on domains should be able to do what you want it to do. You just got unlucky that InMotion Hosting is limited to two under the plan you chose, but other than that, you should be able to use one set of credentials to manage any add-on domain.
I have recently closed my account with WebHost4Life, which was working fine for me until they wanted to charge me an additional 50$ for renewal of my account. The control panel was great for me and allowed me to host all of my domains very easily with their server. They also didn't force you to have a root domain to use the server, so I could utilize folders for each of my websites which was a quick and easy way to update each site.
2 weeks ago I purchased a 2 year plan with InMotionHosting, and I have just realized that the "Launch" plan that I purchased only allows 2 "Add-On Domains" to be hosted through their server. Aka you can only HOST 2 domains, the rest of your domains have to be "Sub-Domains". It is a pain because they require a root domain to use the server, and all of the additional domains have to go through the root. This is a problem for me, because navigating through the FTP is a nightmare with so much clutter!
All of my websites are hosting some sort of multimedia image/sound and feature creative commons free downloads, so none of them are commerce.
Is there a service similar to WebHost4Life (but not as crappy) that allows you to host multiple websites, offers unlimited webspace, and does not require a root domain? If there is someone please speak up so I can get on with the show here! Appreciate any replies