You should hide rather than delete the normal list item form (see
http://support.microsoft.com/kb/935504/en-us for more information).

There is a blog reference to an issue with custom new item forms and list
folders at
mysharepointblog.com/.../Create-a-custom-list-form-for-a-SharePo\
int-list.aspx, but I can't find any matching KB article in a quick search. It
might be worthwhile making sure your environment is up-to-date with service
packs and cumulative updates.

Thanks for your for your hel! I had tried deleting the ListFormWebpart
and got the same result.

The issue is only with Discussions Boards. The instructions on the link you sent
me work fine for other list type, and even for discussion Boards--until you, try
to create a second discussion with the same title. Then you get the error 'A
Folder with the name.... Already exists. (at least I do)

Have you hidden the ListformWebpart and inserted a new DataformWebpart for a
Discussion Board List and then tried to add a new discussion with the same
subject?

In a discussion list, each topic is actually a folder, and the replies are items
within the folder. When you create a new discussion with the same name as an
existing discussion using the standard form, there is logic that assigns the new
folder a different URL while it keeps the same display name. When I created a
second topic also called "test topic" using the standard form, the URL path
ended up as "/Lists/General Discussion/Test topic 9654" although the topic was
displayed as "Test topic" in the list.

I tried adding a custom "new item" dataform to the newform.aspx page for the
list containing the Subject and Body fields, and hiding the standard list form.
Using this, it creates the discussion folder with a URL based on the item number
in the list. I created a third discussion on the subject "test topic", it still
worked. This time the path was "/infra/Lists/General Discussion/5_.000".

So I'm not seeing the same behaviour as you. Maybe it depends on which fields
you include on the new item form?