Holy cow, I wrote a book!
When you right-click on the desktop or in an Explorer window
and select "Sort by... Name",
why doesn't it actually sort by name?
Because "Sort according to the default sort order for the column
whose title is... Name" is too long.
The default sort order for the first column (whose name is "Name")
is to sort by name, mostly.
The actual sort order for the desktop and file folders
(note: implementation detail, subject to
change at any time) is really a two-tiered sort.
First, the items are sorted into buckets;
the first bucket contains the virtual folders,
the second bucket contains file folders (directories),
and the third bucket contains regular files.
Sorting within the first bucket is done by the "item order";
sorting within the second and third buckets is by name.
not by ASCII code any more.
special treatment for numbers
The "item order" (a term I just made up) for My Computer,
My Documents, and Recycle Bin were specifically chosen in
Windows 95 so that the icons on the desktop appeared
in that order.
I believe it was in Windows 2000 that the order
was changed to My Documents, My Computer, Recycle Bin
in order to put the focus on document management.
(And those who have read Appendix A of
will know what sort of application compatibility problems arose
from that simple change.)