I tried the "sheet set in the pillow case" thing, but it didn't help me keep my linen closet neater. In fact, it looked messier because I had what appeared to be large blobs on the shelves instead of almost well folded stacks. But then, in a home with only two people (and only one bed), I didn't have trouble keeping sets together to start with, so maybe I shouldn't have even tried utilizing that tip.
I'm not too picky about how the sheets are folded, though I used to be. These days, as long as it's the right size to fit on the shelf, and is relatively neat, I don't really care about the details. It helps that the two sets of sheets we use most often are "t-shirt" sheets. They aren't crisp linens by any means. As they are no longer new, they are wrinkled and stretched like a favorite well-worn tee. Casual folding habits do them no harm.
Life is good!