[Intuition]

Lightwave pseudo acts like Maya in that you would have a project folder. This would be a top level folder with some subfolders... like Maya's with Scenes, Images, SourceImages, etc.

I can't remember what Lightwave's folder structure needs are but I'll open it up tomorrow and see if I can figure it out again.

I half think its trying to remember any folder structure you have when you save the scene (*.lws) file... so even if you don't have a traditional Lightwave Project folder structure that as long as when you open the scene if LW knows what the top folder is... it should branch from there to the folders with the same objects files (*.lwo) images (jpg, tga, etc) and plugins.