I ripped all my CDs to FLAC a couple of years ago and have the files stored on an internal HDD (Artist Title\Album Title\Track Number - Track Title) and backed-up on an external HDD. The CDs live in the loft. Any new music I get is digital and I put it in the same place but in a "Downloaded folder" so that I know it is not ripped.
Tag-wise I only use Artist, Track Title, Album Title, Year, Track Number and Replay Gain values. Any downloaded tracks I get, I strip them down to this set of tags. In all my tags all the first letters of every word are capitalised.
If I need non-flac files for any reason I used foobar2000 to transcode.