Have just noticed that email notification handling seems to have changed in Vibe 3.1.
Now if you set an email notification on a sub-folder, it now sets notifications on every folder above and below the one you selected.
Changing the notification on a parent or child folder sets the same notification everywhere in the folder tree.
It only stops when it hits a workspace and does not propagate to other folders in the workspace.

As it stands the notification is now pretty much useless for folders.