[Dovecot] Does dovecot support subfolders in Outlook (and in general)

Ok, I am playing around with dovecot and things are running relatively smoothly. I am using Outlook as that is what the client uses for Email. I can copy messages to and from the IMAP folder. I can create folders from the root directory fine.

My question is this. I have folders like this:

IMAPServer --Inbox --Trash --WorkToDo

Now when I try and create a subfolder in "WordToDo" I get an error message "Unable to create the folder. The server responded: 'Mailbox doesn't allow inferior mailboxes' When I try to create a subfolder in "Inbox" I get an error message "Unable to create the folder. The folder 'Inbox' cannot contains subfolders..."

So is this a limitation of Dovecot? Another problem with Outlook? Or do I have some configuration problem on my end?

Thanks.

--- Charles PS: My first impressions of dovecot are very positive. It is a much cleaner and, so far, easier to handle IMAP server than the heavyweight UW & Cyrus IMAP servers. Congrats on a impressive program.