For anybody who might be curious and/or following this, I was never able to resolve this issue. It apparently stems from the fact that I had the editor in a separate physical location on the server from where the file upload directory was located (see this
other post where I outlined the specifics). As I noted in the earlier post, I was able to get the file uploads working, but then I ran into this problem where I couldn't browse through nested directories in the file browser.
I gave up trying to use the editor to upload files or images and used FCKeditor instead which will work across differing physical locations on the server without this same problem.