If you drag and drop a folder into another folder in the media section, and a media item in the same directory has the same name as the folder, this media item will be used as a folder (the content of the dragged folder is created as children of the media item).
This is an issue since the media picker don't treat the image as a folder, so the children can't be picked.
I am seeing this issue on Umbraco version: 8.6.2 on a blank install with starter kit.
When I upload a folder, I'd expect a folder in the media section to be created. If the issue is the dublicate name, then the folder should have the (1) suffix you normally get, when trying to create an item with the same name as another item.
Seems harder to reproduce in the root of the media section than inside a folder.
Content of the dragged folder is created as childs of the media item with the same name as the folder.

@OlePc that's a funny one! I can reproduce it... will have a look at a fix right away 馃憤
PR in #8344 馃憤