Question about Outlook Express

Repro steps:

In SkyDrive:

1. Create a folder called 'Favorites'.
2. Note: In this specific case, the user has other machines running Win8 and Win7 syncing IE favorites to this folder)

On new computer:

1. Install/upgrade to Windows 8.1 (note: this also repros in Windows 8.1 RT)
2. Windows Logo+R to open 'Run' dialog box
3. Type: %userprofile% and press: 'OK' to open user's profile folder in Explorer
4. Right-click the 'Favorites' folder and click 'Properties'
5. Click 'Location' tab and click the 'Move...' button
6. In the Destination dialog, choose: %userprofile%\SkyDrive\Favorites and click 'Select Folder'
7. Click 'OK' on the 'Favorites Properties' dialog

Behavior (in Desktop Internet Explorer):

1. In Desktop Internet Explorer, the 'Favorites' from SkyDrive appear as they should (this is expected)
2. Navigate to any URL, and click 'Add to favorites'
3. In the 'Add a Favorite' dialog, only the root 'Favorites' folder is shown in the 'Create in' field; no sub-folders are shown(expected: all sub-folders should appear)
4. Click the 'New folder' button and type a name
5. Result: the 'Create in' field is blank and appears disabled
6. Click 'Ok'
7. In IE, expand 'Favorites' and examine the folder you just created. It is empty. (expected: it should have a shortcut to the page you just saved)

Can anyone help with this issue?