Notice the slashes / backslashes (The last one) :
/C:\Inetpub\photoalbum\albums/
---^-------^----------^-----^
Is this why coppermine cant find and new folders?
(Running IIS (Windos))
With Friendly regards : Greger
This is a known issue. sorry..
I had the same problem - try turning off the browseable batch upload in general settings - worked for me (windows environment)
As Coppan suggested: that's a known issue on Windows-driven servers.