Virtual Folder Filtering Problem

And then, I wanted to start over... I know I can hide the VF, but then I can't re-use the name. Isn't there a way to remove the virtual folder without deleting the files in the destination folder?

You can delete the the VF you created (the root VF). This operation is safe. But if you are not sure right-click the VF you want to delete and select the "Open in Explorer" menu item. TLB opens the explorer and selects the folder/file. If this folder inside the "toolbar folder" then you can delete it. Also you can delete folder using explorer - this is the safe way because you see what you delete.