Error occurred in deployment step 'Add Solution': The solution cannot be deployed. The feature '<Feature>' uses the directory “<Folder>" in the solution.

Came across this problem the other day, it occurs when you retract and uninstall a SharePoint feature, then try and install the WSP again. The obvious thing to is check to see what the feature is in powershell using; get-spfeature <GUID> however this returns nothing.
The answer is to use the old trusty sledgehammer of stsadm, navigate to the 14 hive/bin folder and run the following command:

   1:  

   2: stsadm–o uninstallfeature–id <<GUID of feature>>–force

This should sort the feature and allow you to install again.