Hi @DonnaR ,
well, that's an interesting question and I had to go check what the behaviour here is.
Seems like you can set the folder for each version individually but since in the test case grid you only get to see the newest version, it won't have much effect. Reports don't work with this either.
So, in essence, you can set the folder seperately, it just won't do you any good.
Maybe contact support, because if you can set the folder, it should have some effect. 😉