It worked...

The process:

1. Create the directories on the TF card (my_pix & my_flix) <--- I imagine these could be named anything you want.
2. Copy the /brew/mod/arcmedia/arcmedia.ini to the harddrive from Bitpim. Save a copy of the file so you have the original as a backup.
3. Opened the file in notepad and modified the 2 lines to read:
Under [Pix Settings]
from Card Folder=fs:/card0 to Card Folder=fs:/card0/my_pix
and
Under [Flix Settings]
from Card Folder=fs:/card0 to Card Folder=fs:/card0/my_flix
NOTE: If you haven't already done the vid duration edit you can do that now as well
Under [Camera Settings]
from VidDuration=15 to VidDuration=240 (This will change your recording time from :15 to 4:55)
4. Save the file.
5. Right click on the file in Bitpim, choose overwrite and point to the modified file.
6. Close Bitpim and disconnect the phone.
7. Restart the phone. (not sure is step was necessary but I always restart after making any hacks to the phone.

Checked my pic/flix settings to make sure they were pointing to the card. Took a pic and a flix and they saved to the new directory on the card I also moved a pic and a flix that was already stored on the phone and they moved to the new directoy as well. Nice find. Now if we could just find this setting for the ringtones so we could put them in /motorola/shared/audio on the TF, we would have it made