"C-\Documents and Settings\Username\My Documents\..."
The column after the drive letter is replaced already but not the backlash. I understand that a user can take profit from the Replace option but it's not obvious. Is this normal behavior?
Anyway I don't see the benefit of naming a file with it's original path

May I suggest to replace this field with another? Say the parent folder name. This may allow to set names like "Holiday_Belgium_004" where files are stored in a directory structure like
"C:\...\My Pictures\Holiday\Luxemburg"
"C:\...\My Pictures\Holiday\Belgium"
...