My suggestion is to first get Thunderbird working to support Gmail's structure. Once that is stable, you can experiment with changes.

How do I do that?

Remove the folders and sorting that you say aren't working with Gmail.

When I originally setup Thunderbird and imported the mail - it didn't import the folders/labels and sort the mail. I tried adding the account again and it still isn't importing the labels. No filters are setup in Tbird. Just manual sorting. I don't see how removing the folders and sorting would fix this? I'm wondering if there's an add-on or some way that I have Thunderbird configured incorrectly (I'm using IMAP - should I try POP?) to solve the issue?

Maybe it will help if you describe what happened when you set up your gmail account. If it didn't show folders, what did it show?

When I first setup Thunderbird - it imported the mail just fine. Then I went about sorting email into the existing labels (that appear as folders in Tbird). I sorted a bunch of stuff - deleting folders and adding new ones. I didn't think to check the web gmail to see if the changes were being reflected there. Now that I've spent hours sorting stuff in Tbird - none of those changes are reflected in the web gmail. What's weird is why/how it imported everything correctly but now isn't mirroring the Tbird changes in the web app.

So I'm wondering if there's a way (extension perhaps?) that I can force the sorting I've done in Tbird to the web gmail. *fingers crossed*

I have about 50 folders and about 20,000 emails sorted into them. This is a big job and moving everything back into my inbox and starting from scratch will be a LOT of work. Just hoping for a work around to save myself hours of sorting.