Why are the source contents copied but not the source folder itself?

SyncTime syncs the source with the destination. It does not sync the source with the file inside the destination that has the same name as the source; doing so would make it less flexible as it wouldn’t allow to sync files with different names. When the source is a directory, you can easily create one on the destination from inside the Open panel by clicking the New Folder button. You can read more in Source, destination, base.