ok. I tracked down this problem. ETP is smart enought to create a folder on the package where you are trying to use it. What causes an error is if the directory that is the parent of the acs-subsite package does not have a cr_folder assigned to it.
Right now, ETP tries to get the cr_folder of the parent package and assign that as the parent of the new folder it creates.
So now my question is, should the cr_fodler hierarchy match the site-node hierarchy? Is it ok is an acs-subsite content folder in a subdirectory does not have a parent folder?