Folder view is an option that allows Internet Explorer users to use "Drag and Drop" when connecting to an FTP server. For this option to work, Internet Explorer has to open a direct connection to the FTP so it means it can't work through any HTTP proxy
Article from Microsoft : http://support.microsoft.com/kb/217888
The FTP Folders feature does not support the following functionality:
- Connecting to the Internet using a CERN proxy server or Web proxy server.
- Connecting to a Virtual Address Extension (VAX) or Virtual Memory System (VMS) FTP server.
- Using Internet Explorer from within a separate program or service.
- Copying files from one server to another.
- Drag and drop functionality from an FTP server.
- The Copy command on the Edit menu and context menus does not work for files on an FTP server, but you are able to copy files locally and paste them on an FTP server.