The answer from brettdj (thank-you brettdj) works well and is probably the method I'll use, but I've found something else that also works and that might offer an advantage in other situations. For one thing, it retains the extreme simplicity of using Dir to loop through folders.
In Excel 11, I use Dir (as described in the question) to create a list of jpg files from each folder (one folder at a time), sorted alpha-numeric in Col A. Then I use a Custom List to sort Col A with a (fake) numeric sort so I can process my jpg's in serial order. Then clear Col A, and repeat with the next folder.
To generate the Custom List:
in Row 1 of a work column enter
=ROW() & ".jpg"
and Fill Down to whatever suits. In my case I used 1000 items on my Custom List because that's the maximum number of jpg's I expect in any folder.
Custom Lists take only text (or "simple text" according to MS Help) so the newly generated list of formulas has to be converted to text using Paste>Special>Values before importing as a Custom List. Each item on the list is one of the expected file names. The final Custom List looks like this:
1.jpg
2.jpg
3.jpg
…
…
1000.jpg
After I import my new Custom List (Tools>Options>Custom Lists>Import), it becomes an available selection in the dropdown menu at Data>Sort>Options>First Key Sort Order.
If you're doing this sort with VBA then here's what the Recorder provides:
Range("A:A").Select
Selection.Sort Key1:=Range("A1"), Order1:=xlAscending, Header:=xlGuess, _
OrderCustom:=6, MatchCase:=False, Orientation:=xlTopToBottom, _
DataOption1:=xlSortNormal
The first 5 Custom Lists are built into Excel, so OrderCustom:=6 is the new Custom List. Remember to change this back to OrderCustom:=False when doing normal Sorting. Custom Lists stay attached to the Wkb they're created in until deleted.