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I was adding a new folder in the Groups list and it was added to the bottom of the group list. I wanted to change it's position to higher in the list but the problem is I can't seem to do it. I opened the .nbi file and I see the [TOPICS] header where the folders are listed but it is sorted in alphabetical order so it doesn't look as if that is where I can change the order of the group folders. Dragging the folder name in the groups lists doesn't work. Is there a way I can manually rearrange the group folder list rather how it currently is which is in the order the folders were created?

Yeah you can't. At best you can generate group folders then drag and drop groups into these folders to group and compact your list.