I've always struggled with VS.NET 2003 and adding a solution to source control from within the VS.NET IDE. It always seems to add a folder for the solution root, then the projects in their own sub folders.

Ta-da...found the article that explains it.

VS.NET 2003 differs from 2002 in how this solution root is handled.

Bottom line:
there's a REG key that will make VS.NET 2003 NOT create the solution root, then subfolders.

[HKEY_CURRENT_USER\Software\Microsoft\VisualStudio\7.1\SourceControl] "DoNotCreateSolutionRootFolderInSourceControl"=dword:00000001

(update)
This still seems to work for VS 2005 as well. The reg key is in the ...\VisualStudio\8.0\SourceControl directory as expected.

(good thing I have the reg key above - the article linked above seems to have disappeared)