So have it prefer unequipped items, or even return a "I'm not sure which one you want to fold" error when it can't figure it out. But returning a "You don't have anything transformable into that item!" error when I have only one item that can possibly be folded seems wrong.
I had a minor problem crop up in the last day or two with the daily builds. Upon logging out, I have mafia set to run the following childishly simple script:
fold cheese diaper
outfit Adventures
And upon logging in an even simpler script removes my sword behind inappropriate prepositions...