I'm in the midst of converting a fairly large website (500+ pages) into WordPress as a content management system. I know that there are two schools of thought regarding site architecture:

1. Those who believe that everything should be categorized, I.E.- website.com/shoes/reebok/running

2. People who believe that the less clicks it takes from the homepage the better.

As it stands, our current site has a completely flat architecture, with landing pages being added randomly to the root, I.E.- website.com/affordable-shoes-in-louisville-ky

I'm beginning to think that there is a gray area with this. I spoke to someone who says that you should never have a page more than 2 categories/subfolders deep. But if we plan on adding a lot of content doesn't it make sense to set the site up into many categories so we can set a good foundation for adding massive amounts of content.

Also, will 301 redirecting to the new structure cause us to lose rankings for certain terms?

Any help here is appreciated.