I haven't tested it in a 10.5.1 or earlier, but on 10.5.2 it doesn't seem to work. Both New Smart Folder and Find... commands show me the same options... Maybe I'm a bit blind but I can't locate the default locations nor other option to change the search directory...

BTW, I've always found a bit annoying that the default search path is "This mac" when the search is performed through the spotlight field, it is more likely that one wishes to look for an item in the current folder rather the whole machine.

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FYI, I think I did pretty much successfully replicate the OP hint but with a slight difference (or maybe I didn't understand correctly the original hint ;)).

Instead of typing CMD+F to start up a search in a specific folder, one should open that folder in the Finder (as mentioned in the original hint) but use the search field (top right corner of the Finder window) instead of CMD+F. This way, you get the selected folder as a place to search (alongside the usual default folders).

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