I am truly thankful for this article that explains the best way I have found to configure everything “for maximum happiness” as the author puts it without the slightest bit of exaggeration. See for yourself:
http://db.tidbits.com/article/10253
However, I should note that I do modify the approach a little bit for my own purposes. I do happen to like Gmail’s “All Mail” concept, so I am skipping the steps suggested to hide the “All Mail” and “Starred” folders; but that is certainly a personal preference and does not change the overall excellent method described.