Yes, I was wrong about SmartFolders - this Mail.app has covered. No idea what you mean by favorites though - I don't see any such option, same for different labels. Maybe it's some new Lion version that added that?
Yeah I think that's new in Lion. The flagging feature is a little half baked since you can only pick from preset color labels. If there's a way of renaming them to something more descriptive I have no clue how to do it.
