Put me on this list waiting for a response as well. Having 4 e-mail boxes coming into this iPhone and having over a hundred e-mails showing all the time is not good. I would like the set the purge number much lower but I could live with 25 as long as they all didn't show up as being unread.
Actually I do have Mobile Me and I switched from Entourage to Mail to be more compatible, and they do sync like lighting. It is a great tool...however I have not seen that the read e-mails sync as "read" to the iPhone. They still show as unread in my iPhone inbox.
Well, I've been at this a week now and it still doesn't work. The blue dot stays on (and the reminder on the main Mail icon) until I open each e-mail and close it or delete it. Is there some setting that I haven't set?