This is best illustrated by an example and the attached image.
I have created a custom library called 'Downloads'. It contains two locations:
2. f:\downloads (external drive)
My problem is that the Save As dialog will not let me save to the root of location 2 (F:\downloads). It will, however, let me save to location 1 (c:\users\%user%\downloads) or to a sub-folder of location 2 (F:\downloads\XP drivers for Acer 9500 etc.).