For me it is not at all clear where you have your folder.jpg-files. Normally someone wants a cover of an album to show. So are your folders album-oriented? Or are all your music-files together in directories like "2000's"?
From the error-message you get I can only see that you obviously wrote "Format string:folder.jpg" as a format string instead of just "folder.jpg".
BTW:
You can enable MP3Tag to also show not only embedded cover-art but also cover-art that only resides in the folder if you leave
"Don't display first image ..."
in File -> Options -> Tags
unchecked.