Thanks for the suggestion, Leon. Unfortunately, it doesn't look it matters if the Project Manager folders are open or not--it still doesn't sort the TOC in the same way that the Project Manager is sorted.
Solved with some assistance from Adobe.
The icon that shows AZ is not an AZ - ZA toggle. Its two states are Sort by Name (A-Z only) and Custom Sort.
Auto-create TOC is always based on the Custom Sort order.
So if you want an A-Z toc, you need to custom sort the folders into that order. If you do that, then toggling the icon will have no effect as your custom sort will be alphabetical and, obviously, the sort by name is alphabetical.
Obvious? No. I have suggested the bubble text is clearer and that the icon should change according to the state. Please submit a feature request yourself as the more people who report a bug or request a feature, the more likely it is to be actioned. Please follow this link.
http://www.Adobe.com/cfusion/mmform/index.cfm?name=wishform&product=38
See www.grainge.org for RoboHelp and Authoring tips