Hi Here's the solution if you don't have it yet.
1) Copy e-mails in the Storage folder back into corresponding folders in the e-mail accounts they originate from.
2) Once the storage folder is empty, Toolbar -> View -> Layout
(Dialogue box opens up)
3) Select "Folder Pane", and list appears beneath
4) Un-tick "Show Storage Folders"... and it's gone !!
