Is there a reason why you want your seat to be level with you handle bars such as in this picture:

http://www.downtube.com/images/2008_Bikes/NS/9NS_Standing.jpg

What is the advantage to this? Shouldn't the sitting position on a folder be more upright as opposed to a road bike?

Yes you normally are sitting more upright. Set the seat at the correct level for slight knee bend and
then adjust the handlebar for comfort and control.

I started out riding as upright posture as I could get. As I got fitter and more used to it, I found myself being more comfortable leaning forward. Now my bars are actually lower than the saddle and I find it comfortable. It is important to understand the subtleties of bike fitting to ensure you are comfy. The forward leaning posture allows much greater power to be developed - pedalling firmly effectively supports the upper body.

+1 on Jur's comments,
After many years on roadies with drop bars that sit lower than the saddle, I can say that the comfort level on a long ride is far superior than on a bike where the bars and saddle are on the same level. Strange as it might seem to some, my hands and wrist ache a lot more on that sort of bike set up.

+1 on Jur's comments,
After many years on roadies with drop bars that sit lower than the saddle, I can say that the comfort level on a long ride is far superior than on a bike where the bars and saddle are on the same level. Strange as it might seem to some, my hands and wrist ache a lot more on that sort of bike set up.
I personally would agree. With an aggressive set up, I find that my legs carry most of the weight and not much is on my hands or saddle. I like the feeling of "floating" over the seat and saddle that I get when everything is just right with my form. I suspect that most riders never achieve the form required to to this.

OTOH: most long distance touring riders have the bars a bit above the saddle "for comfort". I don't quite get it though and have my bars 3-4" below the saddle for multi-month touring (Just about the same as my road bike).

Unfortunately I can't get that position on my Helios and the best I can do after minor modification is to get the bars level with the seat. It is fine for around town errands, but for longer distance riding I would like a more aggressive position. Since I mostly use the folder for short rides it is fine.

I wonder if it's got to do with blood flow? As in, if you have your hands lower it's easier for circulation, whereas when level or elevated it's resticted or more difficult?

I started riding in the upright position on my Curve too. Now that I am stronger at cycling and doing longer distances, my handlebars are lower than my seat. I use Ergon bar ends too. I find it more comfortable to be lower and at a more aggressive stance now. I don't know why though.