Which folder do I use in Develop when there are folders and sub-folders?
It doesn't matter as long as the photos you want to edit are in the filmstrip. That said, generally the subfolders are preferred over their parent folders, since you're less likely to get "lost" due to over-abundance of extraneous photos.
Or, you can have the photos to edit in a collection and select that instead.
Or, select parent folders and use filter presets...
I don't understand your question. You organize your photos into folders and subfolders either before or as you import images into Lightroom. Then, you choose whichever folder or subfolder contains the image that you want to modify using Lightroom. Your images are not "in" Lightroom. That folder/subfolder structure is showing you where your images are located on your computer.