A System 7 user would not be able to see this folder either. The drop
folder was created in an area where the user doesn't have access
privileges. You must create a drop folder within a folder that the user
can access. The folder itself cannot be the share point. Since a user
can't "See Folders" on a drop folder, it makes sense that they would be
unable to mount that folder as a share point.
Create a folder named "Drop Folders" with all privileges except "Make
changes." Within that folder make your drop folder. That should solve the
problem.