I don't think this question can be answered out of context. How often does the user access specific folders, and how much of her work is centered around them? If a lot of my work takes place in My Documents/Prototypes, then I'll be grateful if they'll both expand when I expand My Documents. On the other hand, if I'm working on 10 different projects and I keep switching between them, then the following will happen: I expand the Projects folder, and the last project I worked on is expanded. But I now need a different one, so I expand it manually. The next time I expand the Projects folder, two subfolders will be expanded, and I'll expand a third one, etc. Very soon I run out of real estate, the subfolders I do need disappear deep below the fold, and I need to either scroll or tidy the place up by collapsing folders manually. My navigation becomes inefficient and frustrating.
In short, my rule of thumb is - if the user is expected to be working with a few folders, remember their states and make them more accessible. If she is expected to be working with a lot of folders, try to reduce chaos and keep it tidy and efficient.