I accidently deleted my Pictures personal folder on my Vista laptop earlier and was stuck trying to recreate it. If I created a new folder and called it Pictures then it would turn in to a file, if I copied an existing folder and then renamed it to Pictures it, once again, would turn in to a file.
The trick to restoring it was to run the following command via the Run prompt in the Start Menu:
shell:Pictures
This then recreated the folder for me.