I want to archive some of my Thunderbird email as Windows (XP) folders and Text files. Does anyone know a utility (pref. Free) to do this?
Thunderbird folders ARE text files. If you go to the local storage folder (you'll find the location in Account Settings... , , Server Settings, Local Directory:) then you will find (either in that folder or in the folder within it that has the extension .sbd) two types of files. The .MSF files are index files. The files without extensions represent Thunderbird's folders in MBOX format which is essentially text. Try opening one of them with Notepad to see if that is what you were after.
Why do you want to do that? If you want to backup your emails I recommend using MozBackup.
If your main concern is to reduce the size of your mailbox, Thunderbird has an option to "compact" folders.