IMAP email is server based. You read and manage your messages remotely from your devices. If you read a message on any device it is marked and displayed as read on the server. If you delete a message from any device or at the server it is gone.

There must be some setting somewhere that will not mark it as read on the server?

You read the message on the server via Thunderbird. It marked as so.

Right click the message and select Mark as Unread.