Touche... Siddhartha, you are correct, but its not a bug with your system, it is generic.

This has been a bug/lack-of-feature since the first beta. We made an effort to specify the icon for a folder from the server, but due to an oversight they are not picked up until the second login. Since 99.9% of people don't logout/login, it means everyone is seeing what you see. Hopefully fixed in a future release.