I am not a proponent of using folders in a SharePoint document library, but if you must (as I recently had to for a client due to permissioning requirements), it is now possible to assign metadata to folders as well as list/library items in MOSS 2007.
If you choose "Edit Properties" on a folder, however, you will not see any of the metadata associated with the list or library.
Folders are special beasts, and their metadata fields need to be added at the content type level. The best way to do this is to create a new folder content type, then add the desired columns to this content type. (Not a good idea to over-write the default folder content type!) Then make sure the desired list or library allows management of content types (in Advanced Settings on the list or library), add the new folder content type, and you're all set. The good news is that even if you've created your folders already, all you need to do is switch them to the new content type (in the Edit Properties window) and you can then assign metadata.
Thanks to adrian at MossChampions for pointing me in the right direction.
