you're doing it wrong... no, wait, you're doing it right
I have 7 64 and I get the same result as OP. to set it up:
"desktop/test/" folder
"desktop/test/test.exe" file
"desktop/test/test/" folder
right-click on desktop, create new shortcut.
navigate to "desktop/test/test/" folder and click OK.
watch as windows makes a shortcut to desktop/test/test.exe instead!