Digging a little deeper it seems to be possible to accomplish by setting up a new User-Role and assigning it to a user, see the guide below:
1) Go to Settings-> Manage\Roles.
2) Create a New user role (TheClientNameRole)
2) On the Role's Options tab: Set KB Article to Custom
3) On the KB Articles Tab: Check the "View" CheckBox for the specific Client-folder.
4) Save.
5) For the Roles Everyone, Registered User and, Registered User with Verified Email do the following (Up to point 9 and then repeat for each mentioned Role):
6) Open the edit view for the Role.
7) On the Options tab: Set KB Articles to Custom
8) On the KB Articles tab: Ensure that the client-folder's View Right is not selected.(i.e. unchecked)
9) Save and repeat.
10) Go to Users/Organizations.
11) For each one of the users for the specific client:
12) Open the user, go to the Roles Tab and assign the (ClientNameRole) by checking the corresponding checkbox and clicking Save.
It's a bit of long way round approach. :( And will be rather maintenance intensive as the number of folders and users grow.
I did confirm two good things:
a) The access control is inherited by child folders.
b) When a user, who does not have access to the folder, creates a new ticket the articles in the access-controlled-folder does not appear as "Related Knowledge Base Articles".
I still believe the this can be made much easier to accomplish and maintain.
Hope the summary saves someone some time. And please if there is better way to accomplish this let me know.