If a message in Local Folders is in plain text format, your reply will also be in that format (no formatting options). What happens if you hold Shift when you click Reply to one of these messages?

Thanks for the reply. Using Shift does help, but it still not good. It does give me format options, but starts at bottom and no signature.

The mails I've tried with are not plain text either so that's not it (or not it entirely).

This was working no problem last week. Then my hard drive crashed. This new behaviour started after installing. Pretty sure I was up to date prior to the crash. So there must be a config option somewhere that I'm missing...

Go check the Local Folders account settings for Composition and Addressing. Make sure use HTML is checked and the signature options are set like you want them.

Right click Local Folders in the left pane. Select Settings, then Composition and Addressing

That was my first thought, but there isn't a "Composition & Addressing" option for Local Folders. Funny enough, there is for the news group...

You are correct. I was looking at the display wrong. Are the composition and addressing forums for all you accounts set correctly? Maybe you have one set to use plain text and do not have the signature location set like you desire.

You can tell from your screen shot that the reply from the Inbox is using HTML because the Formatting Bar is there. In the reply from the local folder there is no formatting bar since you cannot format plain text.

You proved this by holding the shift key when hitting reply since this toggles to the opposite format.

Ok, so I configured my news group settings just like the inbox and that carried over to the local folders...

Is there anyway to link the local folders to the inbox settings instead of the news group settings? News Group is plain text and I don't need my sig for it either...

I don't think the format of replies to messages in Local Folders are linked with the settings of newsgroups or any particular account. Since Local Folders can contain messages to or from several accounts or identities, it's more likely that the formatting uses the setting of the account or identity that appears in the From: field when you reply.

That is how I think it should work; how it works in practice may be different.

That's it. I had completely ignored the "From" part.

So one last question about this then: How do I set the default "From" account? It keeps defaulting to the news group account. Can I set this or does TB learn?

When you say "it keeps defaulting to the news group account", is this for a message that was originally to or from a news group? If so, the From address will reflect that fact. To have TB use a specified account or identity when replying to messages in a folder, you will probably have to use an add-on such as this one:

https://addons.mozilla.org/en-US/thunderbird/addon/folder-account/

Another add-on helps you choose the correct From for any account:

https://addons.mozilla.org/en-us/thunderbird/addon/identity-chooser/

No, all mail in my local folders is from my inbox. No worries, I'll use one of the add-ons.

Thanks all!!