For the main menu, right click "Favorites" and then one of the submenus. You will have an option to sort by name. You can do the same with each folder underneath that menu.
If you alter the aranged order, by drag and drop manually, you will have to delete the key again.
If you have a frequent habit of doing this, You may find the attached reg patch useful.I have altered the suffix only for the purpose of downloading. Change .txt to .rteg and place the file somewhere accessible. Now, when you double-click the file (to launch it, IE stops adding new items in alphabetical order.