Yes, you can certainly do this. There is no absolutely right or wrong way. Organization of one’s library really depends on the organization of one’s mind. From a library object point of view, yes folders at the top level, then projects, then albums inside projects. You can even have nested folders, or folder inside projects that group albums to your liking. Just remember that photos are always in a project.

Albums are nothing more than virtual collections of photos. For this reason albums can even contain photos from multiple projects, and can appear anywhere in your Library .. top level, inside a folder, inside a project, even inside a folder that is inside a project.

For example, you can have an album under your top level Holidays folder and add to it your favorite holiday photos from all your holiday trips. The fact that it is under the Holidays folder is purely my suggestion. It could even be at the top level outside of any folder.