No. Dovecot supports this fine with Maildirs. Your directory must be named .something and have the usual Maildir layout.
I still cannot create a sub-folder using Thunderbird. But when I create it manually and them move the mbox files it recognizes it.
For instance:
~mikep/mail/sent ~mikep/mail/Lists ~mikep/mail/Lists/Dovecot ~mikep/mail/Lists/MySQL
Is what I *WAS* having problems seeing.
Second I get the error message:
The current command did not succeed. The mail server responded: Error in IMAP command MYRIGHTS: Unknown command. My client is Thunderbird.
That's strange - I use Thunderbird 0.7.2 (under Windows) and I've never seen that message before.
Unfortunatley I don't have anything in my logs about it. This would happend anytime I would click on any other mailbox besides Inbox. What I think was happening was that Thunderbird still had those mailboxes in it's memory so they were listed, but Dovecot did not know about those mbox files since I had not made the change in dovecot.conf yet for it to know about ~/mail.
Everything seems to be working fine now. Thanks for the responses everyone!
Cheers, Mike