If I close the phone [Fold it up], the phone completely shuts off, even after opening it up and pressing the button doesn't do anything. Now the strangest part is if I leave it open [the fold out keyboard] and never close it everything works fine and doesn't shut off even after the "Screen timeout". What do I do to fix this and this NEVER happen before the update.
I was baffled by your question because the Intercept isn't a fold-up phone. The keyboard slides out and in, or, as ginglish said, opens and closes.
So I'm going to assume that you really do have an Intercept and are just describing what the keyboard does in a wierd way.
I had unintended power down issues with 2.1 when putting the phone in a pocket of my jeans. This is similar to the old butt dialing problem. The solution is not to put the phone in a tight pocket. I haven't tried the phone in a tight pocket with Froyo, so I don't know if that will still cause it.
Try closing the keyboard as it sits on a desk in front of you. Does the phone power down immediately? If so, does it do a normal shutdown, or does it just go black? Do you see any force-close messages?
Let the phone continue to sit on the desk. When the screen goes off, wait 30 seconds and do the gentle touch of the power (hangup) button and see if the screen goes back on. If it does, let the phone sit there for 10 minutes and repeat the test.
Make sure when you do this that your battery is above 30%. The phone will shut itself off when the battery gets very low.
Ginglish is right that you may have to take it to a Sprint store, but I'm not sure we're at that point yet.
Let us know what you find out.