I can come close, but I wanted to see if anyone can get it spot on...

Basically, when there is no album tag I want to put it under the name of the folder it is in, which is most often called the same as the album anyway.

Also, if the album and artist tags are not set, I'd want it to to use the folder above that one for the artist name. It's tricky!

Take a look at the title formatting help:

$directory(x), $directory(x,n) : extracts directory name from file path, optionally goes up by n directory levels.

So for the album:
$if2(%album%,$directory(%_path%))
...