Tested on: GS3 compiled from source (checked out from svn on March 03, 2008) and on GS 2.80 binary installation.
When a collection is created in GLI with case-folding options available (Design tab > Search indexes > Casefold ticked), the Greenstone browser's preferences page says that the case-folding is ON (meaning searches performed should be case insensitive by default). However, casefolding starts being OFF by default in spite of what the preferences page says, so that searches made are case sensitive. Casefolding does not take effect until the Set-Prefs button is pressed (with casefolding status showing ON) which then turns the functionality ON.
See https://list.scms.waikato.ac.nz/mailman/private/greenstone-users/2008-March/006504.html for this problem identified by Jack Kelly.