Let me add some disclaimers first. I no longer have fuctioning iPad 1, my memory of how iOS 5.3 apps worked is imperfect, and I'm not sure the newer versions of iTunes will work exactly the way I'm going to describe with an iPad 1.
Short story; I'd set up some folders on my computer and then sync them to the iPad 1 using iTunes.
You can not create a true folder tree this way, but iTunes will accept a single level of subfolders which will be converted to albums in Photos on the iPad. You can use any photos tool you want to organize the folders, as long as you adhere to the one subfolder limitation.
My first reason for doing it this way is that the app you want probably does not exist. While there are photo album apps galor, finding (a good) one that still works with iOS 5.3 is going to be nearly impossible. Finding one with import/export tools that still work only adds to the problem. With Photos you can bypass all that. The app is there, it's not going to be updated to the point it does not work. All you need to worry about is that Apple might stop supporting the iPad 1 in iTunes; which I admit could happen.
Second, there is no chance you'll accidently put a photos on the iPad just to lose them when it dies. All updates and changes to the albums have to happen on the computer (which you, of course, backup regularly), and then synced back to the iPad.
Third, space on an iPad 1 is at a premium. iTunes automatically optimizes synced photo albums for the device they will be displayed on. That means you won't be wasting 8MB of storage on a photo that would look just as good on the screen as a 2MB version.
This is not the best possible solution; just the only one that I can think of that has a decent chance of being satisfactory.
I recommend you play arround with the Photos app. Maybe import a few albums using the iTunes method. See if it's good enough.
Or you could get lucky and someone else here has a better answer. That would be great.
