I am currently using BB 8700 and just setup the email connection. Now all the email and SMS is going to my "Message" Folder. Is it possible to have 2 different folder to store SMS and Email?

There are some themes, I believe, that will separate SMS from email but most do not. Everything goes into the one main message folder. If you are on BIS 2.0 then your email should go to it's own folder. What carrier are you using?

I am using Smartone-Vadaphone in HK. The carrier is helpless and no reply at all for my question. I also believe that there should be some theme to support this. Just dont know which theme and where i can download it.

you can unlock the Zen theme.

check this out

Zen theme will separate SMS and Messages