Hello Chris,
Welcome to Microsoft Community and appreciate your time taken for sharing detailed information. It seems that you would like to re-sort the folders in the new Outlook.
Recently, our new Outlook did get some updates. We apologize for any inconvenience this may cause. If we would like to rearrange our folders, maybe we can add the folders in Favorites and then drag the folder to a new location in the Favoritesfolder list. Outlook supports us to reorder folders in favorites list.
When we drag and drop the folder to the image below, we can successfully move its location and will not be moved to other subfolders. Hope it's helpful.
Apologize again for any inconvenience caused. If we still prefer the previous way, we suggest to switch back the classic version of Outlook. In addition, we also recommend that we can submit feedback within the new Outlook for Windows to help us improve the product : Contact support and provide feedback within the new Outlook for Windows - Microsoft Support.
Thanks a lot for your understanding and hope you have a nice day!