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[canetoad]

1. Does.not.compute.

If you say you relocated the folder but 'VLC doesn't know'... There's something more going on.

First, check in your VLC options (Tools > Preferences > Video) where the Video Snapshot Directory is located. Can you post a screenshot of the properties of that folder? Maybe it's inside a protected folder, hard to tell without more info.

Just in case of a corrupt folder or similar, try installing Unlocker. http://www.majorgeeks.com/files/details/unlocker.html
Install with Context menu activated. Right click on folder and try moving or renaming it. See how you go.

On Edit: another thought. Do you have file extension names turned on? If not, turn them on and see what extension this file/folder has.