FULL PRODUCT VERSION :
java version "1.7.0-ea"
Java(TM) SE Runtime Environment (build 1.7.0-ea-b99)
Java HotSpot(TM) 64-Bit Server VM (build 19.0-b03, mixed mode)

ADDITIONAL OS VERSION INFORMATION :
Microsoft Windows [Version 6.0.6001]

A DESCRIPTION OF THE PROBLEM :
Directories are locked for "Rename" and "Move" operations by the watcher service.

If a directory is being watched, parent directories cannot be renamed.

STEPS TO FOLLOW TO REPRODUCE THE PROBLEM :
Register a directory to be watched, for example : "D:/temp/a/b/c"

Then try to rename "D:/temp/a/" to "D:/temp/a123/"

EXPECTED VERSUS ACTUAL BEHAVIOR :
EXPECTED -
"D:/temp/a/" is renamed to "D:/temp/a123/"
ACTUAL -
Operation Fails.
windows reports :Insufficient Permisions for operation.

ERROR MESSAGES/STACK TRACES THAT OCCUR :
windows reports :Insufficient Permisions for operation.

REPRODUCIBILITY :
This bug can be reproduced always.

---------- BEGIN SOURCE ----------
public static void main(String[] args) throws IOException {

        Path dir = Paths.get("D:/temp/a/b/c");
        WatchService w =FileSystems.getDefault().newWatchService();
        dir.register(w, ENTRY_CREATE,ENTRY_DELETE, ENTRY_MODIFY);
        for(;;){}
}
---------- END SOURCE ----------

CUSTOMER SUBMITTED WORKAROUND :
None...