That seems to have been fixed in version 128.6.0esr that I just installed this evening. Once you've installed it, check the release Notes in 'About' and see if it's resolved.

Updated to 128.6.0esr and it did not work for me.

I will try making a new folder and moving stuff over, sometimes that works (I had a local folder issue screwing up and not allowing some messages to be filed there). But this folder has 5k emails...  :-)

Interesting result:

1. Numbered list item Made a new folder
2. Selected all messages in old folder
3. Dragged to new folder
4. Old folder does not display any messages but says 13 unread of 629

Odd. Went to check directory of local folders to see if it was now empty. It was not, with a .sbd folder under it.

Solution: Unread message and total message count for a folder appears to display the count of messages in that folder PLUS any subfolders (?). So when a top-level local folder is "Favorited" and only favorited folders are displayed in the view, all subfolders (and unread messages) are hidden from the user. So change view to "all" to see all folders.