Yeah having games inside subfolders should be no problem, as long as their path falls inside the "system path" (~/RetroPie/roms/snes, etc.) defined in es_systems.cfg. If you try to point a gamelist for a system at a rom file outside of this system path, ES won't like it and will skip that entry.

Yes, you can use ARRM.

Great. I think you need to edit the first post and turn it into a question.

@herb_fargus

Thanks for your reply.
When I quit ES (F4 or select Quit ES) and go to the command prompt window I can overwrite the files.
Once I am done I just type emulationstation and all is good.