The folder selection is only applicable for the merge action as the split action only works on a single Wireshark capture file.
After choosing the filter options the "Select Wireshark CAP file(s) for Merge" button can be pressed :
This brings up a separate dialog to select the capture files (example for merge) :
Any accepted file type (cap and zip files) in the directory can be selected.
After pressing the Open button ALL accepted file types in the folder are processed :
The supported file types for merging is explained in section Uncompressing files.