This is a common problem lately in iTunes, and Apple support is not of much help. They told me to uninstall iTunes and re-install it, which should fix the problem. They told me that if I made a restored a backup copy of "iTunes Library.itl" and "iTunes Music Library.xml" that I should be able to keep my playlists. That didn't fix the problem. iTunes still was resetting the music folder back again, defaulting to documents and settings.
Here are the steps to take to fix the problem:
Copy the contents of your documents and settings\user name\My Documents\My Music\iTunes to your " music folder, such as M:\.
Start->Run->regedit
Navigate to the following registry key:
HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Explorer\Shell Folders
Change the value of the string "My Music" to the folder where you actually keep your music.
Also Navigate to the following registry key:
HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Explorer\User Shell Folders
Change the value of "My Music" to the folder where you actually keep your music.
Now Navigate to the following registry key:
HKEY_CURRENT_USER\Software\Apple Computer, Inc.\iTunes
The value of the string "Win2KMyMusicFolder" should read "iTunes" (without the quotes). Some have suggested changing this value, but leave it alone.
You will need a folder called iTunes under the folder where you actually keep your music. For example, if you music folder is now M:\ then you will need a folder named M:\iTunes that contains a copy your "iTunes Library.itl" and "iTunes Music Library.xml".
Restart your computer and enjoy iTunes.