You're off topic for this forum, which is dedicated to Windows Live OneCare. You may want to try the Microsoft Public newsgroups here: http://www.microsoft.com/communities/newsgroups/list/en-us/default.aspx
It would also be helpful, when seeking help, to explain what email program you are using or note if it is Windows Live Hotmail on the web at www.hotmail.com and explain what happens when you try to create a new folder.
Support for Hotmail can be found at http://support.live.com
Help for Hotmail can be found by clicking Help within Hotmail.
-steve