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I'm told the problem I see visible in the Update Manager UI is actually the behavior that exists in the org.eclipse.swt.widgets.DirectoryDialog class. The DirectoryDialog is used to support the creation of a new target folder for an install. When you create a new folder (using the pb) as part of the identify the target dialog, you can create a new folder (named NewFolder), but when you type over the name to give it a decent name - the selection value never reacts to the modification. You have to click out of the new folder and then back to get the selection correct.
The is a problem in Windows. Once the DirectoryDialog is up, we have no control over how it interacts with the user.
Here is the Eclipse bug: https://bugs.eclipse.org/bugs/show_bug.cgi?id=13761 It is marked WONTFIX by Eclipse claiming that it is a Windows issue.
Please disregard comment 2. That was supposed to go into my bug :)