The Permissions sample produces the same output and it doesn't trigger the error when running msi:
So I am not sure the error related to the WiX emitted code. The same error happens when installing on the mapped drives though.
<ComponentId="Component"Guid="6f330b47-2577-43ad-9095-186186840a0a"><CreateFolder><PermissionExUser="Everyone"GenericAll="yes"xmlns="http://schemas.microsoft.com/wix/UtilExtension"/></CreateFolder></Component>