There is no inherent limit to how nested the folders may be.

I tried your data and it seemed to work fine for me generating over 3000 lines of output. Could you have a line ending issue? If you are running the script on *nix, but the file is generated on Windows then the line ends generated (cr/lf) won't match those expected (lf).

I notice that some of the names have / characters in them (Folder 7969 for example). That is likely to cause you grief if you use the names as folder names.

It looks to me like you really need a database solution to this problem instead of a file based solution.