How can I create subfolders in Mac Mail for an Exchange account?

I use Mac Mail on OS X 10.8.4 to download my Exchange mail, which is hosted on Office 365.
I can create folders inside existing subfolders in my Inbox, but if I try to create one as a first-level subfolder of the Inbox the option does not exist. Instead, it creates another top level folder and puts it at the bottom of the folder list, not inside the Inbox.
Can anyone tell me how to add a normal subfolder to my Inbox?

Exchange Basics
The Inbox syncs more frequently than any other and should be kept as clean as possible. (this is the number one cause of problems with sync). Do NOT make subfolders under the Inbox.
Exchange checks the server for updates every minute, any folder that has updates will subsequently be synced. Since Exhange has a limit on how many folders can be synced at a time, there can be a queue of folders waiting. The Inbox does get high priority so it will generally sync before other folders that also need to sync.
Keep your folders under the 2GB limit. That's approx 6-10K messages per folder (does not include subfolders) Outlook does not export folders over 2GB as .mbox files
Exchange  Header
Inbox
  Folder A  <---this is wrong
Drafts
Deleted Items folder
Junk
Folder A  <-- this is correct
It's best to move folders using your web interface (OWA) but you can drag in Outlook and/or Mail.
In Browser via OWA
Because of the massive changes the process is best done in your browser. I would also put Mail into work offline mode during this process. After all is moved on the server via the browser, I would delete the Exchange account and let it all download correctly from the server.

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