Steps to reproduce:
1. Create a Documents and Media folder "TestFolder"
2. Configure "TestFolder" as root folder, and configure it so that its root folder is not the default Root, but TestFolder
3. Create a Web Content Structure based on the attached custom-structure.xml and add a Template to it
4. Add a new Web Content with this Structure and in the document field clicks Select > Add > Folder
Result: You cannot add a new Folder, the only folder available there by default is "TestFolder", actually the folder will be "UPDATE", instead of "ADD"
6.2.x - reproduced
master - there is no add > folder option, and can,t configure the folder as root folder, behavior changed.