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When trying to create a new "Java Class Library" project, in "C:\Documents and Settings\username\My Documents", I get this message: “Project folder cannot be created” and the Finish button is disabled. If I try to create it one level up (to "username"), it works fine, so it's related to having "My Documents" in the path.
Reassigning to "projects" for evaluation.
Unfortunately this is JDK bug - see issue 71332 *** This issue has been marked as a duplicate of 71332 ***