Good catch! This is where Windows 7 confuses people and hopefully I can shed a little light on it for you. After you click Start / Documents, do you see in that window, on the left side a list that looks like an outline with headings like Favorites, Libraries, Homegroup, Computers, Network and such?
Favorites is a collection of shortcuts for your convenience in finding often-looked-for data locations.
Libraries are collections of *searches* that are activated whenever you open the "folder" to view them. If you look at the documents library, which is what you're doing now... you'll see at the top it says "Includes 2 locations" or something like that. By default it includes your private My Documents folder and your Public Documents folder in the Library search. So technically it's not a folder so it has no "view" to modify. Read on or skip to the end for the fix.
Homegroup is a collection of all the visible computers and devices near you right now in your Microsoft network. (the other PCs nearby, but not the PC you're using)
Computers is the traditional files and folders view of your PC.
Network is the traditional view of the network, including the PC you're using.
If you want to look at a folder (or modify it) and not a search of the contents of folders (plural), then use the traditional view, under Computers. For my PC, I can just go to C: under Computers and change the folder settings there, but I may have undone some security settings because I was just installing software yesterday and haven't replaced the UAC and other settings yet. I hope that works for you.