This seems to be a known issue, but there isn't much documentation as to why the error occurs.
When adding a network location through the my computer window ie: https://webdav.fastpa.com/webdav/fas/Nudge/ it returns an error of "The folder you entered does not appear to be valid. Please choose another."
The knowledge base article: http://support.microsoft.com/kb/960758 talks about this problem and provides a run at your own risk hotfix. I ran the hotfix and it came back as “You do not need to install this hotfix.”
The server is a dell R710 2008 Server Standard with SP2 and it is being used as a terminal server. Any hints or answers to solving this problem would be greatly appreciated.