Actually, I came up with this problem one day. It just *out of the blue* decided anything in the My Documents folder was invalid. I'll bet reinstalling Java 1.4 will solve the issue, because all versions of LimeWire I have now do this, but I don't mind having the folder elsewhere> I just put a shortcut in the C:\My Documents\Music Files to the LimeWire folder. Simple.
And I truly do hate having the My Docs folder buried in the docs & settings folder on a one user box so I relocated it to the norm. So the unable to find folder is no excuse for Java/Lime not to find it. Even my MS-DOS disk found it.