[Toadling]

Unfortunately, I don't think there's a way to automatically hide folders in the sidebar based on the state of contained projects. However, here are a couple of possible workarounds:

1) You could manually set the folder's status to "Dropped". Its icon will get a red "X" on it and the folder will no longer show up unless you choose to display "All Projects" from the view bar.

2) Leave the folder as visible in the sidebar but use "Group Projects by Folder" in the main content area (using the view bar). Each folder's contents are then represented in the main content area under a gray heading with the folder name. Folders without active projects don't get displayed at all.