When I updated I didn't even realise that folders were gone... it was only when I ended up with a item "in two folders" that I noticed it was doing tags.
My only real problem is that when I create an item it no longer automatically gets put in the "folder" I'm viewing - which I find annoying, but not completely broken because I only generate about 1 password a month...
What is your specific problem with tags instead of folders day to day that makes your current setup unsable?