"Instructions are in the post which the FAQ links to."
The FAQ: Changes to folders are not being detected
The post the FAQ links to: rename - FileSystemWatcher no longer has old filename in some Windows 7 machines - Stack Overflow
In a word, Kaspersky.
To elaborate, I thought I had already tested removing KAS but maybe I didn't reboot after or something, and it's odd because it is also installed on a computer at work that does not present the problem--same version of KAS.
Note that this version is a corporate version, which installs:
Kaspersky Endpoint Security 10 for Windows and Kaspersky Security Center Network Agent
A central policy is pushed out to each client computer and enforced. It has control over settings, like trusted applications (a whitelist). When IT pushed out a whitelist entry for my specific application, it fixed the problem.
Note that there are several checkboxes to select for each trusted application entry. This fix only needed one of them.
Under Settings | Anti-Virus protected | Exclusions and trusted applications | Settings, there is a list that can be added to.
Do not scan opened files X Do not monitor application activity Do not inherit restrictions of the parent process (application) Do not monitor child application activity Allow interaction with application interface Do not scan network traffic
Honourable mention must go to my co-worker, Arti Chauhan, who suggested more than once that KAS might be the problem. I thought I had fully tested when I guess I hadn't.