Is it better (for SEO) to create new pages as just html files or as new folders with index.html in there
well, both are fine. say if your domain doesn't have any of the keyword presence, name a folder with a keyword and out the file inside...There is not particular advantage for doing so otherwise..but always try to keep the files close to base level..
Personally, I prefer making soandso.html 's instead of using folders, though I do use the other on occasions. It will not make any difference SEO wise unless your putting files in very deep folder locations.
i've heard that making new files in the root directory as opposed to creating a new folder is better. the reasoning was that deeper folders are considered less important by the search engines. whether there is any truth to it or not - i really don't know. i wish i could remember where i read this but it seems that it was an article talking about how some content management systems stifle SEO because rather than a flat file structure it has a folder hierarchy. as i said before though - it may not be true. just something i read.
Actually, it is true the Google generally perceives files cloeser to the root to be more important. Whenever possible, I like to use mod re-write to make it look like all of my files are in the root directory. So that... http://www.yourdomain.com/categories/example.html ...becomes... http://www.yourdomain.com/example.html