I know.... another log posted on the same day, but i did all this work last week and have only just got round to posting...
Initially i'd started with the standard Arduino SD Library, which worked fine until i tried to implement directories. Turned out to be a complete pain, so that library was quickly dropped in favor of the SDfat library. After a handful of tweaks and workarounds I made it back to where i had left off with the SD library and onto moving into a directory. Unfortunately neither library has an easy way to move back to the parent folder.
Currently i've glossed over this problem by making the code recognise a extensionless file called ROOT which takes you back to the root folder on the SD card. You could have multiple levels of directories on the SD card, but until i can spend time on recording the route to the current directory, you'll end up back at the root folder each time.