Can you tell us the name of this folder?

You say the folder should not exist. Do you mean it was/is hidden, or something else?

Before you do anything else, I would back up those research and media files to some other media, eg CD or DVD. If you cannot afford to lose them, then that external disk is not a back up because it seems to be your only copy of those files.

That error message. If it was "Access denied", then this may be a simple case of "Taking Ownership". Try the advice in Microsoft's Knowledge Based article here;
http://support.microsoft.com/default.aspx?scid=kb;en-us;308421

If that works, re-scan with AVG and see if the access problem stops the anti-virus from reporting this folder and its contents as suspicious.

If not, did you try to delete the folder or it's contents in Safe Mode? If so, what happened when you tried?

Mark