Per rjcup3's suggestion, I have posted a new question [here][1].

The answer is not that the argument was invalid, but that the new SPFolderCollection was not returning an accurate list that included the new folder. My new question referenced above deals with this problem.

Thanks to everyone for your suggestions!


  [1]: https://sharepoint.stackexchange.com/questions/72363/2010-spfoldercollection-not-updating-with-new-items