This is taken from Google Reader Help Centre:

How can I sort my reading list?

The option to sort your reading list is available in either the Feed settings… or View settings… menu, depending on whether you are viewing items from a single feed or from all your subscriptions.

The Sort by oldest option will display items from the last 30 days, in the order they were posted. This is particularly useful for personal journals and other sites for which the chronological order is important. To go back even further, choose Sort by newest and use our infinite scrolling to go back all the way to the first item we ever tracked for this subscription.

When viewing all items, a third option is available, called auto-sort. This works by prioritizing subscriptions with fewer items. So, with this setting, your friend’s blog with one item a month will not be drowned out by higher volume sites such as the New York Times because we’ll raise the blog to the top.

Though in what kind of way does it show all the feeds in a folder? Sorted by date and mixed up or is it grouped by the feed?

Once you’ve added the feed, go to Manage subscriptions find the feed that you want to move to a new folder, then on the far right where it says Change folders, select the down arrow, then select New folder and the feed will be put into that new folder. You can even drag previous feeds into the new folder. I have made News, Tech and Sports folders in Google Reader in this way.

Also when you are viewing feeds if you click on the folder icon on the left side (below Add subscription)it will show all feeds in that folder as one feed.

colin_w

My Google Reader definitely supports folders. The only thing it doesn’t do is let me view ever post at one (that’s probably a good thing), so forces me to divide them up as you say, tech, sport, niche sites etc.