I do not completely follow what you are saying. When you say: "you must have 'Materials' folders for both yours and SU's" are you saying that I must name the folder on my PC "Materials" and then point SU to look at that folder for materials?
I have tried changing the folder with my files to both "Materials" and "My_Materials". I have subfolders named uniquely and the same ("Stone" and "My_Stone"). In all cases nothing shows up inside SU. If I copy a folder of materials to AppData>Roaming>Sketchup>Sketchup 2017> Sketchup > MAterials then it will show up at the bottom of the list in the materials browser. As far as I can tell changing the folder locations in SU via windw > preferences > Files > materials as no effect. I'm sure I'm missing something which is kind of driving me nuts.
I don't know why I am really even trying to get this to work anymore, certainly isn't seeming all that convenient. My goal is for sketchup to forget about what comes stock with the program and use the materials and subfolders of my choice. I suppose I will just go back to the way I have been doing it which is to change the structure in the OS files.