I found a way to reproduce this condition reliably.
Here is how:
1) Start Slickedit
2) In Smart Open edit box, type: c:\users\<your_username>, and press <ENTER>
3) type the first few letters of any file in this directory. There is an "ntuser.ini" file in mine, so I type just 3 letters "ntu", do not press <ENTER>
4) Now double-click on the file you were looking for. In my example, I double click on "ntuser.ini", it should open in an editor window.
5) Click on the red "X" button next to smart open edit box
6) Now in the upper smart open, click on the ".." to go to the parent directory. Notice that it does not change.
This causes the bad state to get entered and in this state, and in this case clicking on "Change Directory to:" does not change the directory in the lower window.
This state also is where I experience many other symptoms that I documented here:
http://community.slickedit.com/index.php/topic,10356.0.html