Yes it is possible to change the folder for your project
when you download a project, just enter your preferred location
The error is possible a result of a path name which is too long for Windows to handle.
When you press ‘Run locally’ a development folder is made in your project folder with the neccesary file structure to, well, run locally. This might be the exception you're running into because the path of some of the subfolders is too long.