thats because with ht on, your OS is fooled that your computer is a dualy, in a sence. if you had a dualy, and you did the same thing, folding would take all of one processor and the game would take the other. its doing the same thing with folding and a game. it gives half of it to folding, half to the game, so in essense, if you have a 3ghz cpu, your game gets 1.5ghz and folding gets the other 1.5ghz. when HT is off, the game has a higher priority than folding, folding is at absolute low so that it doesnt hog up the cpu when your programs need it, and so the game gets all the cpu, and you get higher frames.
i keep HT off cuz even when not playing a game, for instance just sitting at the desktop, folding gets 50% still while the idle processes get the other 50%. also, with HT off, i can play a game smoothly and it can get all of my cpu, and then when im not doing anything, folding takes over.