hi don,
i know that it's confusing but i think you got things reversed a bit. the semantics probably need to be changed. :( Call the "concrete" directory the core but here's the reality (more or less):

concrete= root/top level custom stuff

concrete directory = core app

when you do an security update, this (concrete directory) is the directory that you replace. It contains all the core functionality. that means don't mess with it outside of updates. ;) If you do a security update properly there's a good chance you'll overwrite all your hard work using your current storage method.

the reason you see what appears to be a duplicate is that you can place code in those folders and they'll override the functionality in the core directory.

basically, stuff above the concrete folder is given greater importance than stuff in it. the concrete folder is your default code.

You can also place custom themes, blocks and add-ons in the level above. This means that when it's time to upgrade you don't have to remember what you put where. :) You can add new folders too.

Short Answer: definitely put your themes in the top Theme folder. I'd make a new theme and not modify the core ones.

tip: if you want to change how one of the core blocks or packages work, copy that folder in the concrete directory to the corresponding directory in the top level. Make the changes there and voila, changed!

example: /concrete/blocks/auto-nav/

to

blocks/auto-nav/(copied folder)

any changes to your copy will override the core block. Uh-oh! you messed up? delete the top copy and recopy to your top folder...

You do have to remember that you chose to override that feature in the future because an update to the core might be really useful (or added the feature you added in a better way).

good luck and have fun!

mario