I think I see what is going on here.
If you look at my first picture, that options changes how the bookmarks appear in the Library view only. As you can see, I have my option set at "Unsorted" which is the default. Yet, my bookmarks are all sorted in alphabetical order.
However, if you want to sort the actual list that you see when you click on the Bookmarks tool menu (as well as the library view), you have to do what I show in the 2nd picture. Right-Click on the Bookmarks menu, and then select the bottom option "Sort By Name".
That will sort the bookmarks at that level in alphabetical order.
To do any sub-folders, you would have to right-click on them and repeat those same steps.
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