I believe the instructions say to create a folder and then select it to make it the attachments folder.
Which instructions are you looking at? I only found Embed files - Obsidian Help which does not mention having to create the folder ahead of time.
I think I must have been remembering an earlier set of instructions because, as you say, that’s not what it says now.
Nevertheless, it is still what you have to do. Create the folder, and then select it from the drop down list in the attachments path.
I think this is a confusion from the instructions in the settings and the help file because it does look as if all you have to do is enter the path and Obsidian will create the folder for you.
Agree. I think all that should be required is to enter the path in the settings. Otherwise, there is no feedback given to the user that the custom path doesn’t exist, and the attachments just start littering the root of the vault.