[Levi727]

I've found this issue too. What I've noticed is that if you have your text message list open, with a new message waiting to be viewed, and you click the person it's from, it'll read one of the messages each time. If you have multiple messages unread, it'll read one at a time each time you click the person.

Example: 3unread. click person -> 1 gets marked -> OK => 2 unread ->click person again -> and so on.

Now, if you press up or down to highlight each message, (as frazell said) it'll mark it as read when highlighted.

Drawback is that if you have the conversation open and get a new message, you HAVE to either highlight it, OR press ok AND go back into it to mark it as read. Pressing OK on an open conversation (that has a newly received message) will NO LONGER mark it as read.

I've tried changing settings in the registry about notifications and such, in vain.

I believe this is a problem with tmail.exe NOT TOUCH FLO 3D. A form of outlook (email accounts type program) that is used for SMS, email... not necessarily Manila/TF3D.
TF3D ports the messages into itself when viewing/replying. sending the same commands to the email program that would happen if viewing in the SMS Inbox. It's just ported out to the nifty skin.