Hard to do proper disc brakes without hydraulics and hard to do hydraulics on a folding bike. The minimum bending radius of the brake lines is the limiting factor.
I have used hydraulic disc brakes and mechanical (wire) disc brakes. Yes, it's not the easiest to set up, but on my Hayes MX5, it works well enough that I have to seriously worry about locking my brakes :)
Disc brakes with cables work absolutely fine. Yes you're leaving some performance on the table compared to hydraulic, but most folding bikes aren't used for racing.
