The Local folders was first made for people that use Imap and wanted to copy messages to have offline. I think it was around .9 that they added the option for Pop mail settings to have the account put the mail into One of these three options:
Global Mail Box (Local Folders Account)
Inbox for this account
Inbox for different account

Now the option you pick depends on how you like to view your mail and if you use more than 1 Pop mail service? I myself have three different accounts and have the email stored in each accounts inbox.
Profiles are very nice and the fact that they are stored in Documents and Settings means if you encrypt your documents folders no one else will get to your email when looking at your files. Unless they are on the machine with your account. Also since Windows XP has the "Files and Settings Transfer Wizard" the mail in the Documents and Settings will get backed up.

The file attachment can be saved to a location, in the options click on attachment and select "Save all attachments to this folder" select folder.

Oh and you might want to read this
http://www.newsforge.com/article.pl?sid=05/01/06/1557216