Hi Cameron,
See my video above from January 31, 2025. That problem is still present whether the context menu is the default modern version or has been changed to the classic context menu using the registry setting you posted.
You must be looking at a different problem, but not one that I have been able to replicate. Regardless of the context menu setting, I don't see an issue creating a new folder using right-click.
I'm testing with Windows 11 24H2 build 26100.3194. Maybe that makes a difference.
Please post the steps I need to follow to replicate the issue you see with right-click > new > folder (prior to applying the change to the classic menu). I would like to post another video showing that problem if I can replicate it.
Thanks,
Les