I'm not sure why. I'm still having problems with creating user folders so I created a user but did not select the "create folder" option. The user is created ok. When I log in as that user, the main screen shows 'panic : POPSTACK" and the set access dialog box.
The good news is that once I'm in this account, I can create folders, upload, etc. just like normal. So, until this issue gets resolved, I guess I can create user folders under this account and then create new users but not folders - then associate the user with the right folder. I think this will work but I haven't pursued it all the way through yet.