@UmbracoHQ, if you would ever be so kind or anyone familiar with the inner workings of Umbraco.

So I tracked down, what I think, may be the crux of my issue. Though I may be wrong. Looking at the SaveFileController.cs I saw that the "SaveStylesheet" method was rewritten between Umbraco 7.12.1 and 7.15.7.

It looks like some clean up routines were written to sanitize files names for XSS. Which make sense, however, I think it broke the ability to create Subfolders for the CSS (probably for the Javascript subfolders to, have not tested) files.

In the 7.15.7 version the code for the routine in the SaveFileController.cs line 241 looks like this:

[HttpPost]
    public JsonResult SaveStylesheet(string filename, string oldName, string contents)
    {
        // sanitize input - stylesheet names have no extension
        var svce = (FileService)Services.FileService;

        filename = CleanFilename(filename.CleanForXss());
        oldName = CleanFilename(oldName);

        if (filename != oldName)
        {
            var stylesheetExists = svce.GetStylesheetByName(filename);
            if (stylesheetExists != null)
                return Failed(ui.Text("speechBubbles", "cssErrorText"), "A file named '" + filename + ".css' already exists.");
        }

        var stylesheet = svce.GetStylesheetByName(oldName);
        if (stylesheet == null)
            stylesheet = new Stylesheet(filename);
        else
            stylesheet.Path = filename;
        stylesheet.Content = contents;

        try
        {
            if (svce.ValidateStylesheet(stylesheet) == false)
                return Failed(ui.Text("speechBubbles", "cssErrorText"), ui.Text("speechBubbles", "cssErrorHeader"),
                                new FileSecurityException("File '" + filename + "' is not a valid stylesheet file."));

            svce.SaveStylesheet(stylesheet);
        }
        catch (Exception e)
        {
            return Failed(ui.Text("speechBubbles", "cssErrorText"), ui.Text("speechBubbles", "cssErrorHeader"), e);
        }

        return Success(ui.Text("speechBubbles", "cssSavedText"), ui.Text("speechBubbles", "cssSavedHeader"),
            new
            {
                path = DeepLink.GetTreePathFromFilePath(stylesheet.Path),
                name = stylesheet.Path,
                url = stylesheet.VirtualPath,
                contents = stylesheet.Content
            });
    }

    private static string CleanFilename(string filename)
    {
        return filename
            .Replace('\\', '/')
            .TrimStart('/')
            .EnsureEndsWith(".css");
    }

I noticed the 'CleanForXss()' at the top of this method. I then followed that and in that method I found in the Umbraco.Core is the 'StringExtensions.cs' file and on line 192, I found this clean up routine that looks like it tags a bunch of characters and cleans it up before passing back to the SaveFileController.cs to the SaveStylesheet method.

    private static readonly char[] CleanForXssChars = "*?(){}[];:%<>/\\|&'\"".ToCharArray();

In Umbraco 7.12.1 the SaveFileController.cs and the SaveStylesheet method looks like this:

      [HttpPost]
    public JsonResult SaveStylesheet(string filename, string oldName, string contents)
    {
        // sanitize input - stylesheet names have no extension
        filename = filename
            .Replace('\\', '/')
            .TrimStart('/')
            .EnsureEndsWith(".css");

        var svce = (FileService) Services.FileService;
        var stylesheet = svce.GetStylesheetByName(oldName);
        if (stylesheet == null)
            stylesheet = new Stylesheet(filename);
        else
            stylesheet.Path = filename;
        stylesheet.Content = contents;

        try
        {
            if (svce.ValidateStylesheet(stylesheet) == false)
                return Failed(ui.Text("speechBubbles", "cssErrorText"), ui.Text("speechBubbles", "cssErrorHeader"),
                                new FileSecurityException("File '" + filename + "' is not a valid stylesheet file."));

            svce.SaveStylesheet(stylesheet);
        }
        catch (Exception e)
        {
            return Failed(ui.Text("speechBubbles", "cssErrorText"), ui.Text("speechBubbles", "cssErrorHeader"), e);
        }

        return Success(ui.Text("speechBubbles", "cssSavedText"), ui.Text("speechBubbles", "cssSavedHeader"),
            new
            {
                path = DeepLink.GetTreePathFromFilePath(stylesheet.Path),
                name = stylesheet.Path,
                url = stylesheet.VirtualPath,
                contents = stylesheet.Content
            });
    }

Much smaller and looks like it is self contained.

That said, @UmbracoHQ, how do I fix this.

We have quite a few sub folders for our CSS files that I would like to edit with through the admin, which is the beauty of using Umbraco for this. I don't want to have to keep uploading files directly to the server if I need to make a quick CSS update to the site. That is just frustrating.

@Anybody????

Ok, so I got an answer from Sebastian on GitHub.

So it was broken for the greater good. Security issues and they aren't going to fix it because U7 is in maintenance mode, which I get.

No direct solution at this time. So either I have to edit and upload the files to the folders directly to the server or I can change all my references in every subsite that uses these stylesheets in their respecitve organized folders if I want to edit them via the Umbraco admin interface. Not ideal but understandable.
Otherwise I need to write some custom code for the core, rebuild and redeploy to my server which could potentially bring back a security risk. Bummer in any case.

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