Maybe the pref mail.operate_on_msgs_in_collapsed_threads is set to true, and the thread is collapsed when you mark it as read? Go to the config editor (Tools -> Options -> Advanced -> General -> Config Editor) and see if toggling this pref to false helps.

This did not work. I was really hoping! Appreciate your help.

Exactly how do you mark the message read? There are two ways. By keyboard you can use M to mark a message read, but also T to mark a thread read. In the menu you have also those two options under Message. I'm not sure whether there are also two different buttons to mark a message read, but if so, you might be using the wrong button. Right click in the button area and select Customize to see if there's another button to mark messages as read, and if so, test if that one works better.

We were using r to mark emails as read. Using m solves the problem! Thank you so much for your help, it makes a big difference to us.

Ah, I'm glad your issue is solved this way. Be warned though, that the M key is a toggle: when you press M on an unread message it is marked read, and when you press it on a read message, it is marked unread.

Since r is the shortcut for Mark Thread as Read you are seeing the expected behavior. Click Message-Mark to see a list of commands and their shortcuts. One of the columns in the message display has a header marker that looks like a pair of glasses. You can click the dot in that column for the message to mark and unmark as read also.