Almost any folder will do, but you want to avoid installing Honorbuddy under C:/Program Files on Vista/Win7. We recommend installing in C:/Games instead. Win7 affords additional, and problematic, permission checks for files placed in C:/Program Files.
The default location (blank box) for Mesh directory is fine. I keep mine under C:/Games/HB-Meshes just so we can easily get to them if needed without having to dive into the default location (several directories deep).
Meshes are more than likely not your problem with running Honorbuddy. If you want help, you'll need to post the profile you are using (or a link to it), and your log (found in your <honorbuddy_install_directory>/Logs).
cheers,
chinajade