"My Music" and various other Window's directories (in MS's recent OS versions) receive special handling by the operating system to enchance their appearance. For example, "My Pictures" allow you view your picture files as thumbnails.

Windows does these tricks using a hidden system file in the directory call "desktop.ini" that gives the OS special instructions for that directory. Unfortunately, this special handling gives some program's problems, particularly in the Open dialog box. I expect that the Open dialog box is hiding "system" directories.

I've experience the problem you describe, but don't see it with LimeWire anymore. Since I've recently upgrade both LimeWire and the JRE, that may have solved the problem.

If you can't make it work otherwise, try changing Window's "Folder Options" to reveal system files, then rename "desktop.ini" in the My Music folder to "desktop.nin" temporarily. Set the folder location in LimeWire, then rename the file back and hide system files again.