I just installed Opera Portable 12.16 on my flash drive from PortableApps.com.
When I start it up, a blue Downloads folder is created in my User's Favorites folder.
I have set up the Downloads path in Opera's Preferences for my User's Downloads folder as follows:
C:\Users\UserName\Downloads
The blue Downloads folder inside the Favorites folder is exactly the same as the "real" one just above the Favorites folder.
If I close Opera, delete the Downloads folder inside the Favorites folder, then reopen Opera, the Downloads folder is created again inside the Favorites folder. The create date/time for the Downloads folder inside the Favorites folder is when I opened Opera.
When I download something from the Internet, Opera tries to download it to my Documents folder. So, it is ignoring the path I set up and the new Downloads folder it created.
I am running Vista Home Premium.
I read on the Opera website forum that there is an option for installing a portable version from that website. It is version 16.0.1196.80. I tried installing and running that from my flash drive. I got the same results: The Downloads folder is created when I run that portable version.
Ha! I am glad you insisted on getting a screenshot. I found something else. In addition to the new blue Downloads folder inside the Favorites folder, there is also a new blue Downloads folder being created by Opera above the Favorites folder. (I marked all the blue Downloads folders with orange arrows in a paint program.) (Original screenshot)

The first (from the top) Downloads folder's Location is: C:\Users\UserName\Favorites\Downloads This is not correct.
When I delete the Downloads folder inside the Favorites folder, press F5 to refresh, this folder outside the Favorites folder disappears.
The second Downloads folder Properties does not have a Location tab. The Location field on the General tab shows: C:\Users\UserName
The Downloads folder inside the Favorites folder has a Location of: C:\Users\UserName\Favorites\Downloads
I should add that I tried adding a Downloads folder on my flash drive and then pointing the Downloads path in Opera to that folder on my flash drive. That did not help. I still get the extra blue Download folders on my hard drive. G:\Opera_Portable\Downloads