There does not appear to be an option to only thread certain folders. With over 40 folders I have varying needs for them. Some of them need to use threads, while others not.
Can this be done, or...?

Which version of KDE are you using? I believe KDE 4.2 allows this.

Sorry, KDE 4.2.3. If it does I sure I have not been able to figure out how.

I've tried setting 'Folder Always Uses This Aggregation' to individual folders as a way to get it to work. But at this point all folders work the same regardless of what I've tried.

There may be a setting to enforce this in KMail's configuration.
Also, can you check to see if you can reproduce this under a new user?