I would suggest, instead of building your own solution, I would recommend, you should use the existing community solutions and modify them to your need.
One such community project similar to your need is the Item Selector created by Bart and is available for download along with the code from HERE
This is quite a clean and highly configurable code which uses a Tree View data structure instead of the Drop Down and lists all publications and then folders and then all elements inside the folders - You can configure and further choose to modify the code as per your need.
If you still want to implement your own solution, then you should be doing following:
- Use the Core Service and fetch all folders information using it
- Bind your drop down with the Folders information
- On Drop Down change event, again call the Core Service to fetch the Items/Component or whatever you need and display it as per your need