Google-drive – Can a folder of Google Drive be embedded on a Google Sites page

This isn't an error. This is how Docs is setup.

It isn't possible to share folders through Google Docs, I don't know their reasoning for it, but I do know that it's impossible.

I think their reasoning is that you may have a different organizational system from the person you're sharing items with, so folders are personal settings. There may be a programming reason for this as well that could involve how there databases are setup, but I don't know.

You may want to consider using the service DropBox instead.

You are really set on Google Sites you create a sub-site with your files set to non public (requires login). yYou have to manually enter who has permissions to view the page however. You can also do page level permissions and select which emails can either view or edit certain pages. You would then upload the Docs you want then link to the doc on the relevant pages

The 3rd option would be to upload them to Google Docs and then enter the email address you want to share the doc with.

Overall, just get a DropBox account.