If I understand correctly, MP3Tag 2.49 doesn't "rename" sub-folders as such -- it creates a new sub-folder and moves only your music files there. This is an important difference, as it will leave behind any "non-music" files like logs, jpegs, lyrics etc.
I think this really needs to be explained in the FAQ:
/t/8016/1
It should probably be mentioned in the various threads on this subject too, as search engines tend to take you to them first (they do for me anyway).
it can rename folders.
the trick is to use the action "Format Value" and choose "_DIRECTORY" as field.
Yes, but AFAIK that only renames the "current directory", not further up. I'm sorry I wasn't clear: The behaviour I'm describing happens when using the 
Converter > Tag - Filename technique as shown here for example: Renaming files, creating folders and complete directory structures from tags
Here's a simplistic example:
Consider the following directory structure and files:
D:\SomeArtist\SomeAlbum\SomeMusic.mp3
D:\SomeArtist\SomeAlbum\SomeArt.jpg
D:\SomeArtist\SomeAlbum\SomeLog.txt
If you do Converter > Tag - Filename with the following string: %artist% SPAM\%album%\%title%
Your directory structure will now look like this:
D:\SomeArtist SPAM\SomeAlbum\SomeMusic.mp3
D:\SomeArtist\SomeAlbum\SomeArt.jpg
D:\SomeArtist\SomeAlbum\SomeLog.txt
Notice all the non-music files were left behind? That's because the directory is not actually renamed as the FAQ suggests -- a new directory is created and only music files are moved to it.
To put my original request another way: Please warn people they will orphan any ancilliary files if they use the Converter > Tag - Filename technique. The FAQ is not clear enough at the moment in my opinion. 
Nighty, you have stumbled over a known problem/misconception/misunderstanding/possibly poor documentation.
Mp3tag provides two pseudo tag variables ...
_FILENAME
_DIRECTORY
... to let the user work with the filesystem.
By manipulating _FILENAME one can rename the filename of the current media file resp. move the selected media files from here to there and let create target folder if necessary.
By manipulating _DIRECTORY one can move entire folders resp. foldertrees including all embedded files.
Search the forum and you will find a bunch of threads with different scenarios how to apply format strings on the pseudo tag-fields _FILENAME and _DIRECTORY.
DD.20111023.1855.CEST
Yes indeed, which I why I'm suggesting some corrections/clarifications/warnings need to be added to the FAQ at the very least, so other people don't have to waste hours of their life trying to fix their music library like I did. 
