Having run into similiar issues I found the following solution:

To move user folders to a different drive first create temp folders in the new location (eg MyDocuments, MyMusic etc.). Then go to the user folders on your C drive and using the properties and location menus select the corresponding folder. Select yes to move files. The operation will correctly rename the temp folders you created to My Documents, My Music etc. with the correct icons and automatically update links to libraries and "me" folders. Apparently you cannot relocate user folders in root folders. I wish I had known this yesterday