We have one known issue on this feature as mentioned below.
On Windows operating system, to add a folder as an image using the Virtual Media, the Desktop directory must be in the HOMEPATH directory. The HOMEPATH directory may vary depending on the Windows installation, but the images created from the "Add Folder as Image" operation always reside in the %HOMEDRIVE%\%HOMEPATH%\Desktop directory. The HOMEDRIVE must be set to C drive. Otherwise, the operation fails.
When Add Folder feature is used, iDRAC try to create the image on client's desktop folder. And the way iDRAC identify the home folder is "%HOMEDRIVE%\%HOMEPATH%\Desktop ". You can check current setting for HOMEDRIVE and HOMEPATH by running SET command from cmd prompt. Add folder operation fails if the resulted folder does not exist. You can fix either by creating the resulted folder ("HOMEDRIVE\HOMEPATH\Desktop) or by setting HOMEDRIVE and HOMEPATH variable as per your client configuration.