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I'm running the 1.1 SP. If I double-click a folder in the sidebar, a new window opens with the Library selected and the focused folder collapsed.

However, I vaguely remember reading about a hidden preference that could be used to make the default behavior for any collapsible item to be expanded. I'm not sure if it would apply here, but it might be worth trying if you can figure out what the pref was. I'm pretty sure I read it on this forum.