How to sort Safari bookmarks in Lion

That approach is more of a straight-to-hard approach. An easier method would be to retain one browser (Safari), and import your old bookmarks into the new Safari under a specifically titled folder to separate them, and sort/delete them at your leisure.

If you would like to make it more difficult on yourself and you don't care for FireFox, Chrome, etc. I would suggest using Webkit, since that's the underlying guts of Safari, and the experience will be the most streamlined for you.

If you do have your drive formatted as case sensitive, use Disk Utility (Applications->Disk Utility) to create a non-case sensitive disk image. Copy all the files over to said disk image and you should be good to go.

It's a little bit of a pain to mount the disk image when you need to look at the files, but probably far easier than attempting to normalize the upper/lower caseness of every filename & href in the html.