thanks for asking.

Yes, "custom menu" refers exactly to what you define.

Regarding the error message: there's a subtle difference whether you 
drag something *on* or *inbetween* items:

If you drag the folder *on* something, a rectangle will be drawn 
around the entire item - and Remote Buddy will assume you want to 
exchange the artwork for this entry. A folder, of course, will not 
work for this.

If you drag the folder *inbetween* items, you just get a line 
beginning with a circle ( o------------------ ), which shows, where 
the new item will be positioned. Dropping the folder this way will 
create exactly what you are looking for.

Hope that helps.

Best regards, 
Felix