In order for Roller Coaster Tycoon 3 to load custom billboard textures, they need to be in a folder named "My Pictures" located inside the user's My Documents directory. However, the file structure was significantly changed after Windows XP, and there is no longer a "My Pictures" folder inside the "My Documents" directory. When I try to make a "My Pictures" folder inside the "My Documents" directory, windows insists there's already one there, and only gives me the option of merging with the existing "My Pictures" folder, one level up from the My Documents directory. Is there any way to override Window's ridiculous knee-jerk reaction to creating a folder that isn't even there, or am I never going to be able to play Roller Coaster Tycoon 3 to it's fullest ever again thanks to a rather serious design flaw?

I can't answer your question, but I can eventually try it out. I'd be interested to hear the results because I've owned RCT3 for many years now, and was thinking of putting it on my new laptop now that everything else was set up.

I'd guess it actually does exist as some sort of link to your real pictures directory, which windows helpfully (read as much sarcasm from that as you like) hides.
In any case, paths of things in a user's primary operating directory is one of those things that many poorly-written programs depend on being one way, so it's likely that explorer hides a number of kludges from you, as a user, because they exist only to appease poorly-written third-party programs. In this case, RCT3 counts as one because it hard-coded the path to pictures rather than asking the shell where to find them.

The "pictures" library is actually a "My Pictures" folder in your "My Documents" folder. Windows Explorer just displays it differently afaik.

So if you add it to "Pictures" and it doesn't show up in the game, you're stuck.

No it's not, not in Win 7 anyway. "My Pictures" is located one level up from "My Documents" in C:\Users\(username)\. I checked the path to be sure. RCT3 does use the windows shortcut to get that far (%documents or something to that effect, which takes it to C:\Users\mydell\Documents) but it relies on the naming convention used by every version of windows up to XP to get to the pictures folder from there.

I did see a way to fix this(in vista at least) in a youtube video using command prompt. Something about using RMDIR or something. I'll give that a shot and let you guys know if it works.

EDIT- this works: http://www.ataricommunity.com/forums/showthread.php?t=570698

but instead of the last step I just created a new folder in the My Documents folder entitled "My Pictures" so I can manipulate it separately. That's just a matter of preference though.