I want to explain why I made the "Folders" disappear in WP7 as well as my other themes (versions not released yet).
Folders are for the desktop. Here you will have groups of Apps. I call them Groupps.
The standard icon for the folder will be the same as the icon for the Applications folder (it is a folder, doesn't really look like it though uh?).
Having a folder in a grid menu is... well... Ugly. With my theme, while there will be personalized icons for "Tools" and "Navigation" Groupps, you will be able to create a groupp that actually looks just like the Application Groupp. Folders are meant to have documents, not Apps. :-)
WP7 theme - Folders + Groupps = Uniform experience
This is what will represent Groupps (Folders) in customized Groupps (Navigation, Office, Tools, Communication...).