I’m also having this problem using Mac Mail in OS 10.4.11
Drafts, Junk, Old, Sent and Trash folders are subfolders in the mydomain.com Inbox folder. Mail also has Draft and Sent folders outside the account folders, where all locally created drafts and sent messages are saved. None of these appear in Squirrel Mail drafts/sent folders.
If I select “save to server” with each of those in the account prefs in Mail, the folders merge, but they still don’t sync and all the locally saved/sent messages disapper.
There is no IMAP prefix set- what should it be? Is there something else that I should try?