There seems to be a little bug in how the last track in the folder image behaves, both in TCP and MCP. This seems to be only a UI related visual bug, otherwise Reaper funtions correctly regarding the folder behavior. I tested this down to v4.01 so I guess it's been here all thru v4. For the same reason, it may be said it's not really a bug but something not completely implemented.
To reproduce, you have to have at least three tracks in the project.
1. Create at least three tracks.
2. Set the first track as a parent.
3. Set second to last track as the last track in the folder.
4. Cycle the first track back to being a regular track.
What happens is that there are no child tracks anymore, yet the earlier last track in the folder still shows the last track in the folder image (track_folder_last). You'll have to click that image to get rid of it.
What I think should happen is that once there is no more folder, there shouldn't be any visual reminder of it either and no separate actions needed to get rid of it. As it is now, it might get a little confusing seeing these folder images left behind, unless you go and separately clean them up.
Here's a screencap showing what is happening:
I tried to search old topics and reports, but couldn't find this thing.