I found this video on how to put apps into newsstand. It also works to put newsstand into a folder. Watch the video and follow my modified instructions below to put newsstand into a folder. This will be undone when you reboot, but it is simple to redo once you get the hang of it. Timing is everything.
http://www.youtube.com/v/MGsy_skhEQc&width=500&height=333
1. Move the folder to the second page of your home screen.
2. Move Newsstand to the third page.
3. Swipe to the third page.
4. Press the home button, and then immediately tap and hold Newsstand.
5. Continue holding the screen until your iPhone goes back to the home screen.
6. Release your hold and immediately swipe to the second page.
7. If the trick worked, wiggle mode should be active. Tap on the folder to open it, and then press the home botton to close it. Newsstand should now be in the folder.