Appears Mathematica can do this, just about as well as any other way:
Tuples[{a, b, c, d, e, f, g, h, i, j, k, l, m, n, o, p, q, r, s, t, u,
v, w, x, y, z}, 3]
So, next part of the question is how to move FOLDERS into those created subdirectories. If first three letters of folder matches, move into the appropriate new subdirctory.
Example:
Existing folder is c:\abcdefg
Move said folder (and contents, of course) into c:\abc
Should be simple DOS command move c:\abcdefg c:\abc
Unfortunately, works for files. Not folders....
Another matter arises when existing folder has only one or two characters. Like c:\ab.
Hmmm....