I can create a folder and populate it with pictures, but when I delete photos from the library it also deletes them from the folder...not what I want. I'm trying cut cut the size of my photo library while I expand my folders
By folders, do you mean Albums?
Essentially, what you are trying to do is impossible.
Photos works on a Library basis. Everything is in the library, all that's in Albums are links to the photos in the Library. This way, a single image can be in multiple albums while using no extra disk space. Cutting the size of the library means you're deleting images from there.