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Hi j1234567890j - and everyone else that repsonded to this post. 
I also expierence this problem and like with everyone that replied on this post an many others that this is driving me insane. To make matters worse, this problem presents itself also on the Open or Save file dialogs in any application that relies on the Windows File Dialog.
In my case I also found that the behaviour is inconsistent. Sometimes the problem presents itself and sometimes it does not. - This is why it is difficult to zero in on the behavior and some folks cannot replicate the problem. So, I believe other replies on various posts where this problem cannot be replicated. As a developer I understand this, since we often have the response: "...but it works in my computer..." - And yes it does, because typically a dev/support machine is set up for ideal circumstances. I am digressing...
Trying to understand the Problem
I have noticed a pattern, however. I have found that if I collapse the folder in question and expand (double click) again, that the navigator moves again, this time exposing all sub-folders that are direct descendants of the folder in question. I have also noticed that if the sub-folders are too many to display in the navigation panel, that the selected folder is scrolled to the top of the panel, exposing as many folders that can be viewed.
I think the intention of the navigation behavior is that when the user expands the folder, it will show as many as possible sub-folders in view - but I also think that this is where there is a bug - or at least where some other setting has an impact on the behavior. - For some reason, when a folder is expanded the navigation pane only finds the first sub-folder and exposes that one - hence the anoying movement of the selected folder away from the current mouse pointer position.
Finding an answer
And yes - even though I think I understand the problem - I agree with everyone elses user experience - This must be fixed!
I am not sure that a moderator will pick this up as this post is marked as awnsered - even though in my opnion it is not.
But if someone does: I think providing an option on the General tab of the Folder Options dialog for a user to turn off this behavior and just expand the folder without attempting to present all viewable folders in the navigation pane.
Regards
Andre Coetzee