How to remove a nonfunctional folder from the Finder sidebar with Paragon installed?

Solution 1:

It's rather simple. Right click on the folder and click "Remove from Sidebar".

EDIT:
Since you specified that after installing the Paragon NTFS driver the folders became un-removable, i suggest that you disable the driver (from the System Preferences preference pane), restart your Mac, and see if the problem persists. If it still persists, remove Paragon NTFS and/or remove your Finder preferences. I will update my answer if disabling it does not work.

Solution 2:

If you're running 10.6.7, dragging to remove from the sidebar changed: Try Cmd-dragging it off. (You've already tried other ways that should have worked and didn't, so I'm not hopeful, but it's worth a try).

This solution works for dead favorite folders in 10.7.2.

I have just fixed a similar problem: An OSX shortcut was pointing to a folder on an HP NAS box which had been deleted so right-click menu was only 1 item. I recreated the folder on the NAS box so I could right click on the Mac to choose from now multiple list 'Remove from sidebar'. Also install free NTFS 3G (linked on Apple site) to access native Windows HDD.