Microsoft has verified that this is an Outlook bug and has escalated it to the Outlook team. Please read both updates below as this bug seems to impact more than just public folders as initially reported.
Exchange Server Pro reader Jens Jensen reported the following problem after installing Update Rollup 4 for Exchange Server 2010 SP1.
After installing the update, I cannot copy folder structures in Public Folders. When I copy a folder with subfolders, only the top folder is copied.
Same problem occurs if I move a folder structure from a Public folder to a mailbox or to another piblic folder. The top folder and messages are moved, but all subfolders and content is not moved, just deleted…
I've tested this scenario in my own Exchange 2010 lab and sure enough, after installing UR4 and copying a Public Folder to a new location in the Public Folder tree only the parent folder is copied, none of the sub-folders are copied as well.
After removing UR4 from the Mailbox server hosting the public folder database and repeating the same copy operation it copied both the parent folder and all sub-folders.
Jens has also left a comment on the Microsoft Exchange Team blog about this issue in the last hour or so and hopefully we'll see a response soon.
Update: 1st July 2011
The Microsoft Exchange team has provided an update on the issue:
In SP1 RU4 we addressed the issue where you could not recover deleted public folders from dumpster. However, Outlook incorrectly passes a flag that indicates the item has been deleted when it has not. As a result, when you perform a copy or move in the manner Jens described, the sub-folders are deleted. As mentioned previously, you can recover these deleted folders from dumpster. We’ve contacted the Outlook team to assist in further diagnosis of the issue and to help us determine the right vehicle for a fix, we’ll provide more details soon.
Update: 6th July 2011
The bug affecting UR4 and Outlook seems to be impacting more than just public folder interaction. Another commentor, Rob, on the Microsoft Exchange Team blog reports the following:
Similarly to the Public Folders issue, after installing RU4 on ExSrvr2010, when a Folder is copied from a user mailbox to a PST, only the folder itself survives the copy, all messages are deleted. Singular or groups of messages will copy OK, but not a folder with messages. Tested (and failed) with both Outlook 2007 and 2010.