Apparently Obsidian does not want to create folders automatically if one does not exist ?
In which case it would make sense to prompt the user to auto-create one when setting a non-existent path to daily notes.
Create path to daily note folder
Click new Daily Note when one has not been made for the day.
An error says the saved folder does not exist.
Prompt to create folder for Daily Notes when folder does not exist in the Daily Notes Plugins settings screen