What you want to do is find the folder in the regular structure, under Personal Folders, and not try manipulating it within the Favorites panel, if that's what you are doing. You ought then to be able to drag it back to be a child of Personal Folders (like the rest are) rather then whatever it is under now.
Alternatively make a new folder under Personal Folders and drag the mail items en masse to the new folder, then r delete the bad 'un and rename etc.
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