Look at top of the items list in the folder... should see something like;
[Name ] [date ] [modified ] [type ]

Click on the one that says name.. arranges by name.

Thank you for the suggestion but there is no items list in the folder.

If I remember right in XP it's in the view menu. Open the folder and at the top click on 'View'. Somewhere on the drop down menu is 'Arrange Icons by:' and you can choose different options. If you choose 'Name' they should be in alphabetical order.

I decided to check out what Mikie was telling you. Click on view in the menu bar at the top of your screen. Find "Arrange icons by" in the drop-down list and click on "Name". I hope this helps.

I paused in the midst of writing my reply and didn't see your post until after entering mine! :)

No problem. I was hoping I remembered right but couldn't check it because I don't have access to XP.

I have XP also and what mikie says is true are you reading acros the line when you click a yellow folder to open? it doesn't say Items list but what mikie says

Well, go figure. I had seen "View" myself in trying to fix this. "Name" and "Auto Arrange" were checked so I thought that could not be the problem.

But I just unchecked them--and now the alphabetizing is working again. A total mystery to me.

Thank you for the suggestions. Helped hone in on the problem area.