Navigation in drupal can take some work to get your head around. I've gone down the Taxonomy path, which I suspect is the correct one :-). At first I was using the taxonomy_menu module, and it seemed to work reasonably well. As I actually started to get some content online though, it irked me that when you chose a vocabulary, the content returned was from all vocabs, not just the one you chose. It seems that the design idea is that content is filtered only based on vocab terms, not vocabularies in general - ie, once you chose a term from that vocabulary, the correct content was returned. I figured I'd have a look at another taxo-nav module.
Taxonomy_html was what I tried. It provides blocks for each vocabulary (separately enabled in block admin), and additionally a "contents" page, giving the equivalent of a sitemap. Since each vocab is set up as a block, you don't get the option to display just content from that vocab (same as taxo_menu), but in contrast to taxo_menu, it didn't lead you to believe you should, either. Also it's nice to have the vocabs already broken out so you can see the terms within, and the item count displayed alongside is a nice touch.
I expect that there are those who would find taxonomy_menu more useful for their situation, but for me, taxonomy_html seems to be a good solution for what I want right now.