This behavior is not new for Windows 7 - it was, at least already in Windows XP, perhaps earlier (I do not have access to anything earlier for testing).
Update : how to play on XP
Using Firefox 3.06, select Tools|Options to open the options dialog.
Select the Main tab and in the Downloads section select Save Files to , then click Browse to open the folder selection dialog.
Select Desktop as the folder. Press New Folder , enter the name of any folder, then press Enter .
Result: The name of the folder at the bottom of the dialog box reads "New Folder", but your actual choice has the name you gave.
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