I love this extension but I am having trouble setting up the structure in the way I really want. I want to create a master template for each of my clients, then create sub sites for that client using their template. I need the master template to be separate from other master templates so I don't change other clients' websites.

Right now, the way its setup, I get two folders. One folder has the multi-sites config and the other folder is inside another folder with the site_id and website. Here is the way it is right now which I think is not right:

root/deployed/multisites


site1 (folder contains only config_multisites.php)
site2 (folder contains only config_multisites.php)
site3 (folder contains only config_multisites.php)
site4 (folder contains only config_multisites.php)
client_A (folder contains folders for site1,site2,site3,site4, client_A_master... which are the sites)

I would like it to be more organized such as:

/multisites
ClientA
ClientB
site1
site2, etc.

Here is a video of the folder structure:
www.screencast-o-matic.com/watch/c6lbosXUw

How do I set this up correctly?

If I understand correctly, you want to create plenty of master website for your customers and after let each new master create their own slave sites.

So have a "Super Master" creating the "Master" for you client is possible but becarefull that the master created will not be syncrhonized with the "Super Master" once you will have created them.
Here it is some guide lines.

Go in the Super Master and create a JMS Template rule:
- Template ID = cloneMaster
- Domain = the domain for the "sub" master.
- Select the template site = <master db>
- Define a "New" DB parameter with table prefix. Perhaps you will have to add in cPanel several MySQL user to the "new DB" to provide the permission to copy from one DB to the other DB
- Deployed direct = New location of the master for the client X
- Perhaps you will have to enable the check box to create the deploy directory. Not required if the client have a specific subdomain or domain that you have created in cPanel before to launch the "master" cloning.

- In the Files/folder tabs, put all files and directories as a COPY instead of a Symbolic Link.
- The "multisites" directory must be replaced by a "mkdir" (empty directory).

Once you have the JMS Template rule defined, go in the Manage site and create the "client master" slave site.
- site ID = mastera
- Select template = "cloneMaster"
- Enter a site title
- Save.

When the new master will be created, you have to login in the new master and apply the patches on the "configuration.php" file.
You will also have to register JMS Multisites again for this new master.

As the "masterA" is a copy of your "super master", it will get its own live and you will have to maintain it independently (mean update Joomla, update/upgrade extensions, ....)