Bug 13034 Cannot create a Source Folder in a new Java Project
build 20020404 If you try and create a Source Folder in a Java Project you have just created you get an error preventing you from hitting finish. STEPS 1) Create Java Project Foo 2) Open New->Source Folder 3) Enter Bar as the name - you will get "Cannot nest entry Bar inside entry Foo/Bar" 4) Create a folder Bar. 5) Add it as a source folder in the Properties Dialog for Foo. No problem.
org.eclipse.jdt.ui/ui/org/eclipse/jdt/internal/ui/wizards/buildpaths/BuildPathsBlock.java
/**
	 * Validates output location & build path.
	 */	
	private void updateBuildPathStatus() {
		fOutputLocationPath= null;
		
		String text= fBuildPathDialogField.getText();
		if ("".equals(text)) { 
			fBuildPathStatus.setError(NewWizardMessages.getString("BuildPathsBlock.error.EnterBuildPath")); 
			return;
		}
		IPath path= getOutputLocation();
		
		IResource res= fWorkspaceRoot.findMember(path);
		if (res != null) {
			
			if (res.getType() == IResource.FILE) {
				fBuildPathStatus.setError(NewWizardMessages.getString("BuildPathsBlock.error.InvalidBuildPath")); 
				return;
			}
		}
		fOutputLocationPath= path;
		
		List elements= fClassPathList.getElements();
		IClasspathEntry[] entries= new IClasspathEntry[elements.size()];
		
		for (int i= elements.size()-1 ; i >= 0 ; i--) {
			CPListElement currElement= (CPListElement)elements.get(i);
			entries[i]= currElement.getClasspathEntry();
		}