Version:           unspecified (using Devel) 
OS:                Linux

KDE 4.7.95 on Kubuntu precise
When you add a shortcut icon to the panel or desktop for folders, opening it will result in an error like:

KDEInit could not launch '/path/to/folder'

Looking at the Command in the icon properties shows that the folder path is used as the icon command, which only makes sense for applications, so I guess you check if the file that is added is marked executable, but not if it's a regular file or a directory.

Reproducible: Always

Steps to Reproduce:
Drag a folder to a panel or the desktop
In the dialog that pops up select 'Icon'
Click on the new Icon

Actual Results:  
You get a window with the mentioned error message.

Expected Results:  
The folder should be opened in whatever file manager is set as preferred application.