Add taxonomy terms into submenu
For an action that is caused by an event I would use the Rules module.

Create new rule

Set rule name, etc.

Set event to act on - saving new term

Set a condition - term is in vocabulary album

Set action - add menu item

These options may not all appear with just Rules.  You may need additional rules modules to get some of these events, conditions, or actions to be available (I think there is one for menus and one for taxonomy, but they may be built in to rules i can't remember.).  

Take what I said as a starting point to put you in the right direction.  Definitely sounds like what you want can be done with Rules.