This problem occurs If you installed the PhotoFlash Scripting Additions that came with QuickTake camera. The "Photoflash Utilities" addition defines it's own version of "Make Folder" which is different from the one the Scriptable Finder defines. This extension was defined and written before the Scriptable Finder was widely available.
In order to properly create a folder, remove the "Photoflash Utilities" from the Scripting Additions folder located in the Extensions folder.