[Dovecot] Mail storage creation fails with virtual users

[Scott H. W. Snyder]

So I have recently set up dovecot with a virtual users dovecot.passdb  
file, but when I attempt to telnet in, it fails because my virtual  
users don't have proper permissions to create mailboxes.

I don't want to have to create actual users for each email account.   
Any idea as to what to do?

The error that dovecot logs:
dovecot: Dec 28 13:06:28 Error: IMAP(user1): mkdir_parents(/var/mail/ 
folders/user1) failed: Permission denied
dovecot: Dec 28 13:06:28 Error: IMAP(user1): Mail storage creation  
failed with mail_location: mbox:/var/mail/folders/user1/:INBOX=/var/ 
mail/user1
dovecot: Dec 28 13:06:28 Error: child 27667 (imap) returned error 89

my [test] passdb file:
user1:{PLAIN}pass1:2001:2001:User 1 Name:/var/mail/folders/user1::  
mail_plugins=cmusieve
user2:{PLAIN}pass2:2002:2002:User 2 Name:/var/mail/folders/user2::  
mail_plugins=cmusieve
user3:{PLAIN}pass3:2003:2003:User 3 Name:/var/mail/folders/user3::  
mail_plugins=cmusieve
user4:{PLAIN}pass4:2004:2004:User 4 Name:/var/mail/folders/user4::  
mail_plugins=cmusieve

Conf settings:
-bash-3.2# /usr/local/sbin/dovecot -n
# 1.0.13: /usr/local/etc/dovecot.conf
base_dir: /usr/local/var/run/
log_path: /var/log/dovecot.log
info_log_path: /var/log/dovecot.info.log
protocols: imap
listen: *:143
ssl_disable: yes
disable_plaintext_auth: no
login_dir: /usr/local/var/run//login
login_executable: /usr/local/libexec/dovecot/imap-login
login_greeting: Hi buddy, have an account ?
max_mail_processes: 2048
verbose_proctitle: yes
first_valid_uid: 1000
last_valid_uid: 5000
mail_location: mbox:/var/mail/folders/%u/:INBOX=/var/mail/%u
mail_debug: yes
mbox_read_locks: dotlock fcntl
auth default:
   verbose: yes
   debug: yes
   debug_passwords: yes
   passdb:
     driver: passwd-file
     args: /usr/local/etc/dovecot.passdb
   userdb:
     driver: passwd-file
     args: /usr/local/etc/dovecot.passdb
   socket:
     type: listen
     master:
       path: /usr/local/var/run/dovecot-auth-master
       mode: 432
       user: dovecot
       group: mail