I think there is a bug in Folder Mode. I copied a folder to my Clip+ (MSC mode) and it showed just fine in Windows Explorer. But after I disconnected the player from my computer, it did not list that folder, but put the tracks belonging to that folder in another one. I spent hours on the phone with SanDisk tech support, and eventually they told me that, according to the supervisor, folders are not supported.
They then said that I could use playlists to accomplish the same purpose, and explained how to go through WMP, etc. I give them credit for spending time with me, but it seems to me that a simpler solution is to edit the Album title to provide a unique identifier for each folder. (You can edit all the files in a folder at once using foobar2000 or another editor.) Instead of going to Folders, I go to Albums; the functionality is equivalent. It works for me!
Mark