asp.net 4.0 has quite extensive url validation. When Alfresco creates a folder it uses alfresco/api/type/cm:folder/formprocessor as the url. The validation rejects the use of : in url's so I added a regex function within my asp.net web.config file.
system.web
httpRuntime requestPathInvalidCharacters="<,>,%,&,\,?" /
/system.web
All of the other special characters are still getting validated, but I did not include ":" so now the url is allowed through.