I have tried multiple times to change the target folder for downloaded files. I have tried deleting the old one when limewire is closed and then downloading a file. Instead of giving me an error (or saving the file in the folder I selected) limewire recreates the folder I just deleted. Has anyone else had this problem? I am using limewire 5 on vista.

On Vista, you need to right-click the LW shortcut & choose Run As Administrator before opening LW.
Then after opening LW, go to LW's menu bar, Tools -> Options -> Downloads, if changing location does not work here, go to Go to Tools -> Options -> Advanced -> Files, & change specific categories to your preferred location.
But I believe your problem is due to not running as Admin. Yes you cannot manually delete the old download folder location before changing it in settings first.