This problem is so frustrating I thought I would post with what helped for me, based on reading through all these posts plus other places. I see a lot of people saying there IS no way to fix this other than to use something like XtraFinder (which ksec points out does not even work with the latest OS version). The one thing I do not see mentioned is that the sorting USED TO work more like the sorting on a PC. In 11 years of using Macs, I never had trouble finding my files until recent "upgrades" (currently using Yosemite 10.10.5). I have so many files I can't get anything done due to not being able to find anything, unless they can be arranged in a helpful, logical manner.
It's helpful to remember that the Mac's Arrange feature means groups, and then Sort is arrangement within the groups. It is also necessary to know that in order to access the "Sort" feature you have to use the ridiculously roundabout method of holding down the Option key so Arrange By in the View menu becomes Sort By. Also, it is important to tell your system that folders are what you want first, by dragging "Folders" above everything else in Spotlight preferences, as stated above (except that I did not modify the plist file and it still worked). Then when you group things by Kind (with Arrange By), the folders will be first in the list in Finder. This works whether I am in icon view or list view, etc.
Personally below the folders I usually like my files arranged by date, so I then choose that in Sort By. Now my files are not in order strictly by date, but they are in order by date within their groups of each file type. I would rather have no groups, but this is far preferable to not being able to find anything. (If I set Arrange By to None, then I have no groups, but then also I have no way to kick the folders up to the top, because the way they will is by making them the top group.)
So basically, Sort By does what Arrange By used to do in the older versions, and now Arrange By is just an annoyance for me. Folders are for organizing things, so to have them interspersed randomly among my files is unthinkable and counterproductive.
Lastly, as someone has mentioned earlier in this thread, you can give feedback to Apple directly, so that MAYBE the next time they upgrade they can take our gripes into account!:
https://www.apple.com/feedback/macosx.html