I've had a custom CMS created similar to IMDB.com
Currently, I fill out the movie information in a custom backend CMS and once I click "Add" it creates a folder and file on the server for each movie.
IE: It will will create /movie-name/quotes/
Eventually this is going to equate to hundreds of files/folders. Is there any downside to doing it this way short/long-term?
I know some scripts dynamically fill a layout and not do it the way I mentioned.
Am I going down the wrong route or doesn't it matter?
Site structure is based on PHP/Mysql
Your concern should be if your strategy on how to create URLs works long-term. And obviously it does as long as you don't get any duplicate movie-names.
Separate from this you have to answer how to get the resource behind any URL, and this is not necessarily connected with a 1:1 mapping from URL to filesystem. It might work that way as a starter, but can be changed later without changing the URL system.
Like I said in my comment, it's really a bad idea and it make database usage totally unnecessary. As to why this is bad, I'll just give you one simple example...
Say you have a movie quotes database. After a while you decide to make actor's name on every quote an anchor link that goes to that actor's page. Would you have a way to do it other than manually editing every single file in your web system? Think about it.
And this is one of the simplest scenarios.
It's totally okay to have a backend CMS and then create the frontend HTML pages out of it.
Make this page-creation automatic and reproduceable so that you can easily re-generate the whole site when the layout changes.
Take care that URIs do not change because cool URIs do not change.
Btw, many good working websites are made this way. Static websites are very effective.
Some of those websites do a compromise, they do not generate HTML only but also little chunks of PHP code for some needs like interaction with the user or retrieval of remote data (naturally as well in a cached fashion).