Finally, was able to remove the seat post shim in my Dahon Helios, greased it (not oil!), greased the seat collar and voila~ no more squeaking!

Ah - another perfect Dahon. Can they do no wrong?

Well done, old boy! Tracking down squeaks is hard enough, but eliminating them is an accomplishment.

wouldn't that cause the seatpost to slide down and now have to tighten the seatpost bolt even harder inducing more stress than there is already on that part of the folding bike then causing it to fracture on the most fracture prone area of the bike ?

There is special grease for this purpose. And many new bikes are greased like this when you buy them. You don't use a lot of it, just enough to take the squeak out of the rubbing parts.

is it a silicon grease ?

Gosh, I am sorry, I don't know what it is called.. Brakemeister might be the guy to ask. Personally, I rubbed as much of the stuff OFF of my bike parts as I was getting it tweaked up, and now I wish I hadn't. I've got a couple of those Dahon squeaks that would probably disappear with proper application.

The plain grease goes on the outside of the shim ie between shim and seat tube, and beteen the collar and the seat tube. I think that's where the OP put it. No grease goes on the seatpost itself, except maybe the friction grease such as from Ritchey, which is a plain grease with plastic particles embedded in it to provide increased friction.

Worked for me too. Just plain old castrol gease in between the shim and the seat tube. The shim incidentally was very easy to drift out after turning the bike upside down. No more creaking for a few miles now.