WaveWorks, it sounds like something happened to your root.cfg file so SmarterMail thought it had to rebuild your file structure. Because of the current way in which SmarterMail handles IMAP, a deleted folder still remains on disk even though it is empty (except for the mailbox.cfg file). If root.cfg becomes corrupt or inaccessible for whatever reason on service restart, SM rebuilds the file structure which would include those empty folders.
In the next major version of SM, orphan folders and folder deletion will work completely removed from the file structure.