Hello, you are right, I reproduced the problem. I had even more problems then you, at first, even if the folder was locked, iTunes played the movie from the trash, where it was placed by Espionage, this means that iTunes does not look for absolute path, instead it "follows" the file. Once emptied the trash it of course said it cannot find it, I told then iTunes to locate it, after that it worked fine, but you are right, it was not possible to add anything as it was complaining that the original folder cannot be found...
But, this happens only with iTunes "special folders..." if you unmark in iTunes preferences the option "copy media into iTunes library" then you can keep your videos in any folder you want on the disk, and when you add it to iTunes it will register properly in media, just that it will not copy over the movie, instead it will leave it in the folder it is.
If you add then this folder to Espionage, it seems that it works fine.
So the workaround would be to put all those videos you want to keep private in a separate folder and add that folder to Espionage.
Please give it a try and let me know if it worked for you
Rgds
Zsolt