Thanks for suggestion but deleting and readding the account did not help.
I have found two other possible solutions, I haven't had the opportunity to try them yet:
1.) Settings>Mail, Contacts, Calendars>Account name>Advanced....Tap each folder (draft, trash, sent, etc) and select the appropriate folder for it. Do this even if it is already selected. (You will see a checkmark next to it after it is selected)
2.) The second suggested solution involves a change at the same settings path above, Advanced> ... change IMAP Path Prefix to INBOX.
Suggestion #2 rings a bell... we're using email off a domain at Network Solutions and the email folder heirarchy on our Mac OS X Mail apps seems to show all the Sent, Sent Messages, Draft, and Trash folders all within the Inbox, which is kind of wierd.
Any thoughts on this? Thanks.