Holy Shit! They actually fixed it. There was an earlier update that said it was fixing the issue, but it didn’t actually fix it, but the latest Catalina Update 10.15.3 has fixed the issue and I can now see folders from Apple Music in alphabetical order in the finder iOS sync. WOOHOOO!
I had submitted feedback via the new Feedback Assistant app, and hope that helped getting this feature fixed. Lets hope they keep brining feature support back to what it was in iTunes!