Try this:
react.ini (C:\Program Files\REACT\react.ini)
[Settings]
Config=FLAC-MP3
Version=1.0
EAC=C:\Program Files\Exact Audio Copy\EAC.exe
musicdir=C:\Music
encdir=C:\Program Files\REACT\Encoders
CodePage=1252
MinimizeCompressionWindow=1
ProcessPriority=1
TracksHotkey={F4}
ImageHotkey={F10}
ImageNaming=$artist$ - $album$
Sla_Bks_Col_Qst_Bar_Quo_Ast_Lt_Gt=-|-|-||!|'|#|[|]
Debug=0
TracksHotVal=+{F5}
SaveTracksCuesheets=0
FLAC-MP3-image.txt (C:\Program Files\REACT\Config\FLAC-MP3-image.txt)
!Description=FLAC image with -V2 MP3
!ImageExt=flac
!CuesheetExt=flac.cue
!destdir1=@musicdir@\FLAC\$cdartist$\$album$
!destdir2=@musicdir@\MP3\$cdartist$\$album$
@encdir@\FLAC.EXE -8 "@source@" -o "@image@"
@encdir@\TAG.EXE -t "ARTIST=@artist@" -t "ALBUM=@album@" -t "YEAR=@year@" -t "GENRE=@genre@" -t "COMMENT=@comment@" -f "CUESHEET=@cuesheet@" -f "EACLOG=@eaclog@" "@image@"
MOVE "@eaclog@" "@destdir1@"
MOVE "@sourcedir@\@basename@.*" "@destdir1@"
SET trackName=$n - $~t
IF "$cdartist$"=="Various" SET trackName=$n - $~t ($~a)
@encdir@\ACDIR.EXE --overwrite --output "@destdir2@\%trackName%.mp3" --pipe "@encdir@\LAME.EXE -V2 --vbr-new --add-id3v2 --pad-id3v2 --ignore-tag-errors --ta $#a --tl $#T --tt $#t --tn $#n --ty $#r{DATE} --tg $#r{GENRE} - $#o" "@sourcecuesheet@"
@encdir@\CREATE-M3U.BAT "@destdir2@" "$cdartist$ - $album$"
DEL "@source@"
create-m3u.bat (C:\Program Files\REACT\Encoders\create-m3u.bat)
@ECHO OFF
CLS
REM CREATE-M3U.BAT Written by Neil Popham, 2005 (neilpopham@bigfoot.com)
SET batchname=CREATE-M3U.BAT
SET version=1.0.0
TITLE=%batchname%, Version %version%
REM REM ##############################
REM PLEASE CONFIGURE THESE VARIABLES
REM REM ##############################
REM Set the name of the playlist to create in each folder
IF [%2] EQU [] (SET playlist=playlist.m3u) ELSE (SET playlist=%~2.m3u)
REM Create list of valid file extensions
SET validExtn=.mp3.mp2.mp1.mpc.mp+.mpp.ogg.aac.mac.ape.flac.fla.wv.shn.ofr.ofs.ogg.m4a.mp4
REM REM ##############################
REM Add another delimiter to the end so I can search for .<ext>.
SET validExtn=%validExtn%.
REM Check a folder has been passed
IF NOT EXIST %1 GOTO NoParams
IF %~z1 GTR 0 GOTO NoParams
REM Remove all existing "playlist.m3u" files otherwise files will be appended
FOR /R %1 %%G IN (%playlist%) DO IF EXIST %%G DEL "%%G"
REM Iterate through every file and pass the path to :WriteToPlayList
FOR /R %1 %%G IN (*.*) DO CALL :WriteToPlayList "%%G"
GOTO:EOF
REM ========================================================================
REM WriteToPlayList : Adds the file to the playlist, if the extension fits
REM : %1 The file to process
REM ========================================================================
:WriteToPlayList
REM Check that the file extension is valid
SET extn=%~x1
IF [%extn%] EQU [] GOTO:EOF
SET tmpExtn=%validExtn%
CALL SET result=%%tmpExtn:%extn%.=%%
REM If no match found in list of extensions exit function
IF [%result%] EQU [%validExtn%] GOTO:EOF
REM Escape ampersand and caret
SET tmpString="%~nx1"
SET tmpString=%tmpString:^=^^%
SET tmpString=%tmpString:&=^^^&%
REM Remove quotes
SET tmpString=%tmpString:"=%
REM Write filename to playlist
ECHO %tmpString%>>"%~dp1\%playlist%"
GOTO:EOF
REM =====================================================
REM NoParams : a folder has not been passed
REM =====================================================
:NoParams
ECHO To run this script, please pass a folder as a parameter.
ECHO.
ECHO Press any key to exit
PAUSE >NUL
Replace the contents of your react.ini file with the text quoted above. Create a new TXT file in "\Config" called "FLAC-MP3-image.txt" and paste in the text quoted above. Create a new BAT file in "\Encoders" called "create-m3u.bat" and paste in the text quoted above.
"create-m3u.bat" is a minor adaption of my batch file "create-playlist.bat" and allows you to pass the name of the M3U file as a parameter, which explains the line:
@encdir@\CREATE-M3U.BAT "@destdir2@" "$cdartist$ - $album$"
... in "FLAC-MP3-image.txt". This should mean that the M3U file is named "<artist> - <album>.m3u".
FLAC image is called "<artist> - <album>.flac" and stored in "C:\Music\FLAC\<artist>\<album>". MP3s are called "<track> - <title>.mp3" and stored in "C:\Music\MP3\<artist>\<album>".
I think that's about it.
Edit: Sorry, just reread your post. If you really want "<artist> - <album>" as the folder structure then change:
!destdir1=@musicdir@\FLAC\$cdartist$\$album$
!destdir2=@musicdir@\MP3\$cdartist$\$album$
... in "FLAC-MP3-image.txt" to:
!destdir1=@musicdir@\FLAC\$cdartist$ - $album$
!destdir2=@musicdir@\MP3\$cdartist$ - $album$