Bill,
The directory is there because, after thinking about it (it's been on my production site for at least 6 months based on my backups, so it can't be a problem), I put it back, especially after reading a post by Sebastian Leupold on why we keep it around. I must have remembered the "have to remove it" from a much earlier version.
Sleeping on the problem overnight, I came to the same conclusion you did: it's a configuration problem at the host. My move has already been delayed half a day because the site bindings for the temporary URL were pointing at the wrong IP; and now this. Worse, I can't delete the link from the control panel or even add a second one. Back on the phone with the vendor. At least when presented with a problem, they do fix it.
As for are they experienced - well, they seem to be a well regarded ASP hoster, they won an award this year from hosting-review.com, and they've been in business since 2003. You know as well as I do that no hosting company is perfect; and I really want to get off my current vendor, Chillox, because of their email policy. Sigh.