Is the reason for the flat structure saving space? I know on older games, space is at a premium and referencing files from the root might save some bytes so maybe that's the reason due to shorter file reference names.
It was way more common to simply not attempt to organize projects in this way "BITD" - it complicates your build system because now it has to manage paths, which entangles it with the OS file system. Not every file system even has subdirectories and not every tool acknowledges or agrees upon how to use them, so depending on how antiquated their dev environment was, it may have been totally impractical.
This was probably development environment limitations. You have to remember that this game was released in 96, which means it was probably developed on a command-line machine with an IDE like Turbo C.
I wouldn't be surprised. As I understood it, just translating the game into English was a problem because there's more characters to cram in the cartridge.