Ok, this might be a bit confusing.

Ok, i have about 1400 images in my gallery, and sure i could be a bit more selective, but thats not the point. I find that if you take a picure on a trip in the mountains and around the local town you might place them in a folder called mountain trip. at the same time you saw animals, some plants and people, so you might tag the images accordingly.

want i would like is to brake down the folders and have a more fluid navigation, were you have "sets" as well as tagged folders that contain images with the related images.

obviously this will mean that there are duplicates but i think it would be a much easer method for sorting. if anything it will relieve my anxiety of is this part of the trip or do i put this wonderful image in the flowers folder.

I suggest you look into using 'dynamic albums' for this. Basically, do a search on the criteria you want for a particular set. Then on the search page click on the admin toolbox. There you will find an create album link. Click on it and fill in the blanks.

the only problem is this isn't dynamic

What isn't dynamic?

Your selections? The albums? The search?

Dynamic albums are dynamic in the sense that they change as items that meat the search criteria come and go.