I tried to reproduce this behaviour at home but I mixed two different issues together: The problem described above is not a problem caused by the multi-format archive plugin.
The issue which I meant is the following:
Drag&drop subfolders within a previously opened RAR archive (in a lister) to another lister seems to make problems. I think this issue was reported here in "2." already.
An error occured copying 'subfolder':
The system cannot find the specified file. (2)
When I open a subfolder withing this RAR archive and copy one file only, everything is working fine. Is this config issue? Do you need some more information? I'll try to provide a RAR archive, which is generating this error. Or is this already a known issue?