I make extensive use of folders, and rules to put incoming emails into appropriate folders. This all works fine, but there is no indication when nested folders contain new emails. It would be a very useful feature to have.
I agree.
Until something like that is implemented, you can find all unread messages in the Unread Folder. 
Not true. They are flagged in their folder, but not in the unread folder. I do not know why. If I check email from my phone, they do not appear at all where their folders are on the hard drive of my main PC.
If these folders are in Local Folders, they will not be synced with your phone at all.
Still, the Unread Smart Folder in eM Client should show all unread messages whether they are in a synced or local folder. That is it’s purpose.
What version of eM Client and what OS are you using Godfrey?
Ah - Smart folders. I must confess I gave ignored them, but there are all my unread emails… DOH!