How can I make a Windows folder "virtual" like you can with directories in Linux using tmpfs?

Probably the functionality you are looking for is RamDisk. It enables you to create a virtual disk of the memory. There's quite good info on a free ramdisk, that I've used before, here. If you also want to be able to save the data on the virtual drive upon shutdown and restore it on restart, I'd recommend a more sophisticated, though non-free, RamDisk Plus from SuperSpeed (google it) - very useful. I'm not sure it's able to make some specific folders virtual, though.

I have never used it, but I have heard of others using IMDisk.

There is no built in way to do it, like there is with Linux. There are also Commercial Alternatives.. this one gives you a 4GB ramdrive free, to go bigger, you need a license.