In case you are also playing with Live Mesh from Microsoft, you might end up that the synchronization between your local Live Mesh client and the server goes havoc.
In my case, I didn't had any folders in my mesh but my local client still showed several folders as being available inside the mesh. Trying to delete them from the "Live Mesh Folders" resulted in this nice error message:
Request to MOE failed with status code
404 Resource not found
If this happens to you, simply should down the Live Mesh client, then search the your computer where MOE.exe is located. On my Vista box, it was C:\Users\TeX HeX\AppData\Local\Microsoft\Live Mesh\GacBase\.
Inside that folder, you will find a folder called Store. Simply delete it and start the client again. Although it will have forgotten all settings, the "Zombie" folders are gone as well.
BTW: In case the client does not accept a folder inside the "Synchronize folder with this computer" (Error 400): Check if the folder is not on a removable medium (USB Stick, SD Card). Live mesh seems to accept hard drives only at this time.