SOLUTION:
This was a pain in the neck but I figured out a fix! It's not perfect because you'll still have to manually edit each source .xmp file and then manually drag each preset to its desired location - so if anyone finds another solution please let me know! I recommend saving a backup in case you mess something up.
- Open the source .xmp file in Notepad++
- Scroll down until you see something like this:
<crs:Name>
<rdf:Alt>
<rdf:li xml:lang="x-default">PM BLUE SHADOWS and the sky is amazing and then people's skin, man their skin looks lustrous.</rdf:li>
</rdf:Alt>
</crs:Name>
<crs:ShortName>
<rdf:Alt>
<rdf:li xml:lang="x-default">PM BLUE SHADOWS</rdf:li>
</rdf:Alt>
</crs:ShortName>
<crs:SortName>
<rdf:Alt>
<rdf:li xml:lang="x-default">01</rdf:li>
</rdf:Alt>
</crs:SortName>
<crs:Group>
<rdf:Alt>
<rdf:li xml:lang="x-default">PM V3</rdf:li>
</rdf:Alt>
</crs:Group>
3. Under crs:Group, where you see "PM V3" in the snippet above, this text is the name of the group that Lightroom will auto-assign the files to. Delete just that text so that the line looks like this:
<rdf:li xml:lang="x-default"></rdf:li>
4. This will solve your problem
Note that you will still have to manually click and drag your presets into whichever folder you want them to belong to.
Additionally, Notice the line under crs:SortName showing:
<rdf:li xml:lang="x-default">01</rdf:li>
The "01" here tells Lightroom to display this item first in the list. To make the item appear in its appropriate alphabetical location, simply delete the "01" so that the line looks like this:
<rdf:li xml:lang="x-default"></rdf:li>