With this configuration, adding playlists with "" for the folder will add them to the "gargle" folder.
Might be a problem there. If you use "" for the folderName it should create the playlist in the root playlist folder not the gargle folder.
If you want to create a playlist inside the gargle folder - Playlist_CreatePlaylist;("gargle", "elves", songs[])
if you want to create a sheep playlist in an elves subfolder - Playlist_CreatePlaylist;("gargle\elves", "sheep", songs[])
edit: To answer the last part of your post, it might just be an issue with you using a space instead of listing a folder name. Playlist_CreatePlaylist;("elves", "sheep", songs[])
Should create an elves folder with a sheep playlist inside it. The elves folder should be in the root playlist folder along side gargle. if using that command creates an elves folder inside gargle, I'd say that was a bug.