Firefox 3.6 let\'s you drop a directory onto some element (using the Drag And Drop API) and process those files with the FileAPI. How does that work with directories?
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Theoretically, what you describe is doable with the FileReader API. For example,
this demo reads a .zip file (hit load photos.zip), unpacks its contents, and
displays the list of pictures it contains to the user.
For general folder drag and drop, there are two bugs holding Chrome/WebKit back: 1, 2. When those get fixe, you'll be able to drag a folder from the OS onto an and traverse all its hierarchy. To see webkitdirectory in action, check out this demo in Chrome.