Custom subfolders aren't created when installing mods.

How to reproduce:
1) Unzip http://www.bay12forums.com/smf/index.php?topic=89267.0 to LNP/Mods
2) Try to install using the Mods tab
3) Be confused when it won't let you
4) Check output log and see that it reports failures when trying to copy files to the temp mod directory that have subfolders.