Thanks for the hint.

I've experimented more than a couple of things and found the following settings works for me, at least it's much better than broken.

Under 'Budles' => 'Edit' => 'Settings' => 'Indenting':

{ disableIndentCorrections = :true;

indentOnPaste = 'simple';

foldingStartMarker = '^\s*"""(?=.)(?!.*""")';

foldingIndentedBlockStart = '^\s*.*(:|-) ?(&\w+)?(\{[^}"'']*|\([^)"'']*)?$';

foldingIndentedBlockIgnore = '^\s*#';

}

foldingStartMarker was copied from Python setting.

foldingIndentedBlockIgnore was copied from the 'Fold on the Dotted Line' section in http://blog.macromates.com/2012/the-layout-engine/