The problem I'm having is kinda the same and I've traced it to Windows 7 build 7057 (maybe just the version of MP12 contained - I've haven't tracked that build number).
I can add directories to the libraries in the Library view of Explorer, but they do not show up as available in Media Player. If I add them in Media Player, that do not index and show the contents; also, if Media Player is closed and restarted, the ones I added through Media Player are gone from the list.
This is really bugging' me (no pun intended). Windows 7 build 7048 had a DLNA complaint server able to serve and transcode drv-ms and wtv files straight to my PS3, but had severe memory leak issues (eat up 4 gigs of RAM in about 8 - 10 minutes and restart the video) in the transcoding part. Build 7057 doesn't have the memory leak, but I can't add any of my custom directories to the libraries in Media Player.
I'm pretty convinced of this behavior. I've reinstalled build 7048 and 7057 several times each to confirm these bugs. I imagine it can be fixed with either some Registry change or rights alteration, but I'm stumped and Google'd out.
I've also tried deleting the MP databases but no luck.
Any ideas?