when the switch boots, it will load the image defined with the ' boot system' command, it doesn't matter if it is located in the root of the flash or in a subdirectory (provided of course that your boot system statement is corect). If it cannot load the image defined by the statement, it will load the first image it finds in flash (which in your case would indeed by the one located in the root).
The IOS image that you specify to boot from with the boot system configuration can point to a file stored in multiple locations. The path must be correct. With devices that have PCMCIA or Flash disks you can boot from those as well as flash: or bootflash:.
I have seen that if the image is not found the system will try to load the first file (not necessarily an IOS image) found. Hence if you have a any file (e.g. crashinfo, then upgraded IOS and deleted previous image) if the boot statement isn't correct you will fall into ROMMON and require manual boot.
We are pleased to announce availability of Beta software for 16.6.3. 16.6.3 will be the second rebuild on the 16.6 release train targeted towards Catalyst 9500/9400/9300/3850/3650 switching platforms. We are looking for early feedback from custome...