FINALLY! I've figured out the cause.....
From Squirrel Mail's wiki, http://www.squirrelmail.org/wiki/Squ...AndCourierIMAP
I found this:
* SquirrelMail Fedora package and Courier
If you use Courier and SquirrelMail Fedora RPM (1.4.4-2) - remove $default_folder_prefix override from /etc/squirrelmail/config_local.php.
Although I'm using 1.4.8.x, I commented out the setting anyway and tried it.... SUCCESS!
Hope this saves someone a week long headache... =)
Thanks Falko for the help and the awesome howto... again!