You're right, and your DH is wrong! There are two selvedges, and you marked them right. Folding selvedge to selvedge would be an A-to-B fold on your diagram. If you fold the fabric so that the selvedges line up all the way down the fabric, this will straighten the grain for your WOF cuts (so the cut ends at C & D will likely be uneven, initially).
Accordian style, I would think, would mean folding it C to D but in stacked pleats, sort of like a folding fan. Maybe even a A-to-B fold first? Depends on if it's for storage or for cutting, probably. I'm not as positive on that one and it probably depends on context, but that's what I would assume if someone told ME to fold it that way.