JSI Tip 8582. 'Documents and Settings is a Windows system folder and is required for Windows to run properly. It cannot be moved or renamed'?

Microsoft Knowledge Base Article 314843 describes the following symptoms:

If you try to move or rename the Documents and Settings folder in Windows XP, you may receive the following error message:

Documents and Settings is a Windows system folder and is required for Windows to run properly. It cannot be moved or renamed.