Does anyone know if there is any way to modify the way the star works in the address bar?

I would ideally like it to show the save dialog when I click it and have the folder it saves in set to the bookmarks menu.

Anyone know if it's possible?

Anything's possible in Firefox... with an extension...

You might want to poke around addons.mozilla.org to see if something like this exists. Otherwise, if you know your way around XUL, it shouldn't be too hard to whip up a quick-and-dirty extension that overrides the behavior of the star button.

https://addons.mozilla.org/en-US/firefox/addon/7269

This folder is actually in bookmark organizer "library", this addon exposes the folder in the bookmarks menu.