I've been dealing with the most annoying thing since installing Windows 7: when in Explorer and drilling down into folders either via the Favorites section or the right-side file/folder viewing pane, the folder tree doesn't expand to reflect my current location. Turns out there's an option to enable this behavior. I'm not sure how long it's been there or if it was in the initial Windows 7 product (I hope I haven't been living with this pain all of that time for nothing), but if you go to Folder Options you'll see a group called "Navigation pane":

"Show all folders" will display the Recycle Bin (and maybe some other things) in the tree while the other option, "Automatically expand to current folder", solves the issue at hand.

Now, when I click on one of my Favorites or start drilling down through folders, the tree always reflects my current location.

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