What's the purpose of specifying a different database directory during case creation?
The ability to store the databases for individual cases in other locations than the main database folder is intended to be used in Lab environments that use a central, always-on multi-disk database server. Spreading individual case databases between different disks allows for multiple users to be accessing the same central database simultaneously, but still be reading/writing to different disks so that I/O performance is not degraded.
In a typical one-box or two-box setup of standard FTK, where there is only one FTK user at any given time, this feature would not really help. In fact, it can result in degraded performance as the database communication is now re-routed to a different disk than the one already dedicated to housing the database. In addition, when used on a workstation rather than an always-on dedicated database server, any machine reboots increase the chance of drive letters possibly changing or other factors that could cause the main database to not be able to see the smaller case databases. If that happens, even for a short period of time, that main database may refuse to talk to the case databases again, essentially losing your case.
It is also important to note that storing your case database in its own folder is not an alternative to performing regular case backups or archives. These case databases cannot be restored or attached to a database, so case backups and archives should still be made on a regular basis.
Note: This applies to an option in the "New Case Options" dialog where one can specify a different path for the "Database directory" and/or select "In the case folder". See sample screenshot below.