It’s an option on the Clip+ but not the original Clip, and SanDisk just doesn’t seem to want to upgrade the Clip’s firmware to allow the option, no matter how much some of us have asked (pleaded …).
A few people have developed programs that you can run that will create a playlist for each of your folders–you might find that useful. You can search for them here; here’s a couple:
http://forums.sandisk.com/t5/Clip-Clip/Automatically-generate-playlists-for-folders/m-p/67892#M23334
http://www.anythingbutipod.com/forum/showthread.php?p=343864#post343864.
You also can Rockbox your player, which then will play by database or folder. at rockbox.org.
