While I fully agree with buchanmilne I can also understand impeham's situation.
Xbmc has been designed to be used with a Library. This is a design choice and leads to a huge range of additionally possible features. For example fanart, smart playlists, item details etc are very hard to handle with a filesystem-only based approach. The downside (at a first thought) is that one has to be very disciplined when sorting and maintaining his collection. You can't just drop files into your music folder any more without caring about ID3 tags or trying to maintain playlists by collecting its titles in a folder. Importing old, large music collections most likely just leads to a totally unusable library. It often requires a lot of work to clean up and sort things. However, those downsides turn out to be the actual strength once you have managed to clean up your library.

Because of this design choice, Xbmc will never support the file mode as good as the library mode. That is because its a) very difficult to maintain along with a very advanced library and b) they simply don't have the focus on it.

Impeham, for the slight chance that there is a bug in Xbmcremote, please send me the debug output while running "xbmcremote -d connection,player" and reproducing the problem. But as I have checked this code quite often lately, I fear its simply Xbmc not doing what you expect it to do.