The DOWNLOAD folder is one of Windows special folders, like My Documents, My Pictures, My Music, etc. Here's how to move it (at least in Win 7):
Right click on the folder in Win Explorer.
Select PROPERTIES
Click on the LOCATION tab.
Click the MOVE button.
Browse for a new DOWNLOAD folder you have created in the desired location and click on it. Then, click SELECT FOLDER.
On the next dialog box, click APPLY and then confirm that you want to move your DOWNLOAD folder.
You can also do this for MY DOCUMENTS, MY MUSIC, MY PICTURES, and MY VIDEOS folders.
It's the only way you should move any of these folders.