Thanks for all your help. I just tried an experiment. I copied a random sample of files from the problem folder into another new test folder and they seem to be arranged correctly. I suspect there must be some registry or other damage somewhere. This was probably caused by a bulk file renaming utility I used on the files in this folder that might not be fully compatible with Windows 7. Rebooting did not solve the problem. I am not sure if a disk error check will help. As a work around, what I will probably do is copy all the files into another folder and delete the old problem folder, then run a disk check.
Kind Regards
Chris