The only thing puzzling here is that in my groups and files pane of
the project, the new directory is BLUE instead of YELLOW. Why? Does
this mean something?
It means a lot.
A yellow folder is a source group in your project. A source group contains other source items or source groups.
A blue folder is a source folder. As far as Xcode is concerned, it is a single entity -- think of it as a "blob" or a package. A source folder cannot contain other source groups or source items. The files and folder you seen inside of it are just its contents. Xcode does not maintain properties for these items (although it will manage them in source control). They can't be individually assigned to targets, they won't be included in header searches, and so on.
Use source groups to organize your project's source items into a hierarchy. If you are adding a collection of source files, you need to add them as a source group because every source file in that folder needs to be a source item for the compile phase.
Use source folders to add an entire folder of content treating it as a single entity. A typical application for source folders would be a folder full of HTML documentation. You don't add individual HTML files to various targets. You treat the entire folder as a single item, adding it to a copy files phase, so that the whole thing gets copied into your application bundle as a resource.
oy. great. ok, maybe you can answer another quesion then, that I feel may be related. When I go to Project -> Add to Project... , in the past I'm sure that I could select .cpp OR .h files. Now, sometimes when I go there I can only select the .cpp files. I'm absolutely certain that recently it has changed back and forth, and I've no idea why. What is happening if I can't select a .h file??