Checking my Backup/Save settings, I see this:

but when I click on "Browse Backup Folder", I get this:

This seems to be very similar to the problem with the Favourites folder - everything appears OK, still set to default values, but nothing is actually getting saved.
The first screenshot shows the appearance of subfolders for each doc, as per the backup settings, but if I search my computer for those folders, the result is "no items match your search".
Windows 7 Professional 64