Advice on converting to git from versioning-by-directory

Hello,

This is an overly long email, please don't waste your time unless you're interested in git-based puzzles. I'm only really trying to solve the problem for fun. (This is what I do for fun now? Oh dear).

I'm in the process of converting a colleague to using git for his project. Previously it was stored in subversion - but was only really used as a backup system, history is entirely linear and there are no merges and no branches. Branching was effectively done by copying directories. So the history went like this:

 * version1/ created and worked on with regular commits
 * version2/ created as a copy of version 1
 * version2/ worked on with regular commits
 * occasional commits in version1/
 * version3/ created as a copy of version2/ and worked on
 * version4/ created as a copy of version2/ and worked on

I simply converted the subversion repository to git and then used a bit of rebase and cherry-pick work to put each commit in a particular directory in its correct branch.

 * -- * -- * -- * -- * version1
            \
             * -- * -- * version2
                       |\
                       | * -- * version3
                        \
                         * -- * version4
                          
This is pretty good.  It's certainly a huge improvement over what there was.  
However, it's still not quite what I want.  The problem is that I haven't 
done any directory reorganising so now this is a mixed version-by-directory 
and version-by-branch repository.  For example the version4 branch, because 
it came from version2, which came from version1 contains directories 
version1/, version2/ and version4/.

This makes merging changes impossible, a bug fix in version1, when pulled into version4 simply goes in version4's version1/ directory - obviously not what would be wanted.

Phew; still with me? Obviously what I would like is to remove each subdirectory, and have all the branching done using git. However, I'd like to keep the history so far for each branch.

What should I do?  I've thought of a number of things:
 * Recreate the whole lot by hand, the repository isn't huge and I could 
manually apply each commit as a patch in the correct place.  It would be a 
bit time-consuming but would mean I'd have what I wanted
 * Keep the current history and move and remove files out of each branch to 
make it look like I want it now, and allow history to be a bit of a mess.
 * As I make each branch reorganise it early on, _then_ apply the history of 
each branch to the right branch.

I'm tempted to go with recreate by hand, as that has the fewest compromises. Before I did that though I thought I'd ask you clever chaps to see if you had any amazing ideas :-)

Andy