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MetadataNavigationSettings contains FolderHierarchy hierarchy for that purpose, the attribute HideFoldersNode defines whether to remove or add Folder hierarchy field: <FolderHierarchy HideFoldersNode=\"True\" /> But for some reason(!) MetadataNavigationSettings class does not expose that property, in fact it is declared as an internal property. ...
As it turns out using Sharepoint 2010, there is no way to create root level libraries using the standard WebDAV HTTP API that is standardized. C#.NET appears to have libraries built for handling this, so use C# if at all possible.
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