You might be interested in these two MSBuild articles that I have written.
MSBuild: Best Practices For Creating Reliable Builds, Part 1
MSBuild: Best Practices For Creating Reliable Builds, Part 2
Specificially in Part 2 there is a section Building large source trees that you might want to take a look at.
To briefly answer your questions here though:
- CopyLocal? For sure turn this off
- Build to one or many output folders? Build to one output folder
- Solution folders? This is a matter of taste.
Sayed Ibrahim Hashimi
My Book: Inside the Microsoft Build Engine : Using MSBuild and Team Foundation Build