Are you not able to create sub-folders in the folders that are being replicated or in some other folder on the same volume?

Make sure the box you are trying to create the folder in is not also a Target machine. If it is also a Target, by default, the Spec is defined to Protect target Files and no data can be written b/c it will be locked by RepliStor.

This is the only instance I could see this occurring in.