Dynamic Subfolder Paths - folder does not exist even after updating asset directories in settings
Ok, so I have figured out why this wasn't working. 
When clicking on reset asset indexes It was always popping up an alert saying that another asset was missing. I already knew this, and it was something I intended on dealing with later. So I clicked OK and as the progress indicator continued to run along with the Tick Icon, I assumed it continued to update everything else, skipping over the error.
But it turns out this isn't the case. The function halts at the error. So once I fixed this other missing asset, everything worked.
It is a little misleading having the progress animation and tick icon still work when in fact nothing is happening.
thanks for all your help. :)