I listened to Inbox Zero, a presentation by Merlin Mann about managing email and your inbox. I was pleased to discover that I've already been doing on my own much of what he suggests.
I don't use any filtering or automatic filing mechanisms on my mail, except for Thunderbird's junk mail filter. All my mail comes into my inbox, and I read all of it. I have made very conscientious decisions over the years about the mailing lists to which I subscribe, and what sorts of things I want to receive by email. I'm only on a few mailing lists, all of them with low to moderate traffic volumes. It's relatively easy for me to stay abreast of mailing list traffic because I specifically subscribe only to those lists on which I know I will participate. (I use the same discipline when subscribing to news feeds: I only subscribe to those feeds which I know I'll read regularly.)
I deal with most of my mail as soon as I receive it. I try to keep less then 30 items in my inbox, although I generally feel uncomfortable if I have more than a dozen items. I've only just recently started deleting email -- I used to keep every single email I ever received. My rationale for keeping all mail was that I could refer back to it later, if I needed it. After some careful self-reflection, I've learned that I don't often refer back to previous email. So where I would keep all SVN commit emails before, I now delete them after reading: they're archived elsewhere, so I don't need to keep a duplicate copy of them.
I do still keep a copy of most mailing list messages, as well as personal email directed to me. Merlin Mann suggests having a single "archive" folder, into which you dump all your saved messages. He specifically recommends against getting bogged down in taxonomy and classification minutia when saving emails. I don't use a single archive folder, but I also don't get bogged down in classification and labeling. I have a "Ham" folder, for all personal emails. I have one folder for each mailing list, so that I can easily go through that list's mail history if I need to refer to a previous message (this is usually faster than searching the lists' online archives). I have folders for online shopping receipts, feedback from my website, and a couple of primary vendors (my ISP, my VPS provider, PayPal). I have one folder for email from each of my daughters, and one for email from my wife. In all, I have 23 folders. When I'm done with an email message, I drag it to its final destination, and leave it there.
At work, I break things down a little more. I create a folder for each person in my department, so that I can easily see my correspondence with them. I have a folder for each of the vendors with which I interact. I've found it very helpful to have this level of organization, but it doesn't get me bogged down trying to figure out where to file something. For departmental contacts and vendors, I do often review back to previous discussions, so having their messages grouped in a folder makes such review fast and easy. For email from folks around OSU, I store them all in a single "OSU" folder, since I only infrequently need to review past discussion. At these times, I find it acceptable to simply search for (or sort by) the sender's name within the folder.
One analogy that I've found particularly helpful as I learned to deal with ever increasing volumes of email was to think of my email program as a physical desk. I only have so much room on the top of the desk, so I should prioritize what items remain there. I leave items on the top of my desk if they need my attention. In the same way, the items that I leave in my inbox are those that need my attention: either a lengthy, thoughtful reply, or some other action is required by them. I don't keep old memos or notes on my desk at work: I file them (sometimes in the circular file). Likewise, I don't keep old email messages in my inbox: I file them. I can access them if I need them; but they don't overwhelm me or get in my way as I deal with current issues.
I don't do the folders any more. After being exposed to Google mail, I switched to webmail for both my personal and work email. In both, I have just two folders: "all" and "sent". Fast search negates the need for folders, in my opinion. I keep all the email I receive from "real people" and discard listmail and system notifications. I have several gigs of historical email, and I use it: at least once a week I search for emails more than a year old.
The problem with desktop email clients is their file-based search is too slow. So you have to use folders. I have long wanted to try an email client that stores emails in a RDBMS, to leverage fast SQL queries, but I have yet to find one that looks promising for the desktop. (dbmail http://www.dbmail.org/ really strikes me as an enterprise server product.) That surprises me: wouldn't storing mail in MySql would be relatively simple? Maybe I'm missing something. Maybe this is not a problem a lot of people care about.
I understand the use of the single archive folder, but it doesn't feel comfortable for the way I access historical messages. Perhaps an example would be indicative:
Let's say I get 20 to 30 emails a day (it's a slow day!). I file each message from a direct coworker into a folder named after them. I'm on a number of mailing lists here at OSU, so I put list messages into their own folders. Anything else from anyone else at OSU goes into the general "OSU" folder. Now if I need to review one of the first messages sent to me today by someone within my department, I need only click on their folder: their most recent message to me is at the top of the list.
If I were to use the single archive folder, I'd have to either click on that folder and then scroll through it to find the message I needed; or I'd have to search by the sender's name. Both of these seem to me to take longer than the process I've adopted.
The other benefit to my system is that I automatically see previous conversations in reverse chronological order based on sender (after all, all the messages in that folder are from that sender), without having to search for it.
For the bulk of my workflow, I've found that I need to review to recent items more often than I search for considerably older messages. Were I frequently searching historical archives for years-old messages, I might well find my system more inflexible than I currently do.
As much as I like webmail, I just can't wean myself from a desktop mail client. I really like Thunderbird! I'm considering investigating OfflineIMAP, as an extra layer of protection / redundancy , so that I have a complete copy of my mail spool on each of the clients I regularly use (work desktop, personal laptop).
What I generally do is when I have to scroll to get to the bottom of my list of messages in my inbox, I file or delete some. But it usually doesn't get that bad (unless there's a flurry of activity on the habari-dev, drupal and wp-testers mailing lists.) And I use mail.app's 'smart mailbox' for those mailing lists - I have it set to display oldest to newest, so I can just run down those messages quickly.
I have an archive folder, an online orders folder, a family/friends folder, an affiliate folder, and a web hosting folder right now. It seems to do the job. The number of folders and where I actually put things really doesn't matter since I usually end up using the search feature to find what I need. (Unless it was recent and I remember where it went.)
I notice that you used the word "drag" for moving a message to one of your 23 folders. For Thunderbird, the extension I use most is https://addons.mozilla.org/en-US/thunderbird/addon/2487. As a matter of fact, if this extension did not exist, I would not use Thunderbird.
On a side note, I really like the ideas you (and Merlin) suggest. It seems, however, that since reading about Inbox Zero, I am about +5 per day and now have steadily over 200 messages in my inbox. One of these days I'm going to lock myself up until it down to something reasonable (0!). The problem is that when I deal with a message, I am usually writing a message ... which unfortunately gets replied to.