I used your first method, a This Week folder, for the past couple of months. I found that it grew to the point of not being useful and wasn't quite what I wanted. I used to order my projects by priority, but that got annoying and didn't work sometimes as priorities shifted quickly.
I started the "treading water" strategy recently and find it much better. I no longer keep a "today TODO list" on paper next to me, and I don't bother with ordering by priority. You could easily alphabetize your projects using it:
http://kouroshdini.com/2009/04/23/ho...advanced-user/
I've implemented most of his system, slightly adapted, and have done more in the last 5 days than I did in the last 3 weeks. It's great.
My views/perspectives now look like this:
http://skitch.com/ijcd/d3p44/screen-...at-10.31.47-am
The key part is organizing by start date in the context view. This overloads the "start on" field to mean either "I've started it on this date", "I will start it on this date", "I need to start it on this date", or "I can't start it until this date". Whatever the meaning, it still works.
It also means that once I've started something, I tend to finish it as the list of days in the start view gets longer and longer and goads me into dealing with that. ;)