Both folders are on the Desktop per screenshots below.
Pc-2 (Win 7) doesn't allow me to move Folder 2 on the network tree into Pc-2 (cursor becomes slashed circle), as it's already on the Desktop.
This isn't a big deal, but I have 6 machines networked (5 Win7, 1 XP) and I'd prefer consistent folder trees, ideally all like the neater XP-style short path, not sure if Win7 allows it.