This code appears to resolve the issue, when added to Application_Start() in Global.asax:
PropertyInfo p = typeof(System.Web.HttpRuntime).GetProperty("FileChangesMonitor", BindingFlags.NonPublic | BindingFlags.Public | BindingFlags.Static);
object o = p.GetValue(null, null);
FieldInfo f = o.GetType().GetField("_dirMonSubdirs", BindingFlags.Instance | BindingFlags.NonPublic | BindingFlags.IgnoreCase);
object monitor = f.GetValue(o);
MethodInfo m = monitor.GetType().GetMethod("StopMonitoring", BindingFlags.Instance | BindingFlags.NonPublic);
m.Invoke(monitor, new object[] { });
With these changes, I can create/modify/delete folders without causing the application to restart.
Not clear if this is the best solution — Don’t know if there will be unwanted side effects due to calling StopMonitoring.