Here's what I did:
A thought: would it make sense to sort folders and searches pesarately, similar to how Windows Explorer handles folders and files? On one hand, it makes sense, but on the other it means the user can't order it the way they want by manipulating the names. (I'm not inclined one way or the other.)
Also, just curious: Is it possible for me to override folder_saved_search.png for only the menu options and not the toolbar buttons? I find it hard to look at scaled down—it's probably designed for light mode.