My suggestion is a front rack. Small wheel folders are different from other bikes in that a bigger % of the riders weight is over the rear wheel, so carrying luggage in the front is good. Some folders have special frontracks made for them but if you have "regular 20" folder" you should be able to use a Dahon frontrack. You should be able to find info on this in other threads as it has been discussed several times.

If you for some reason want to carry luggage on the rear wheel the best solution is on top of the rack OR you can get a taller rack that can carry panniers but this would also make the folded bike much bigger than with a low rear rack. This you would also find info on by searching the forum (unless the "search" function is in a bad mood again..)

Edit: http://www.bikeforums.net/search.php?searchid=7577632

http://www.bikeforums.net/search.php?searchid=7577636