C:\Users\margaret\Documents\My Games\GalCiv2.
Mods would not be found there. The only stuff you would find there are your settings, save files, custom ships, and other stuff.
I think it wants C:\Program Files\Stardock\TotalGaming\GalCiv2\DarkAvatar\Mods.
It should (if Dark Avatar). Is there a GalCiv2\Mods folder you can copy?
Try coping the mods folder from the GalCiv2\Mods directory to create the DarkAvatar\Mods directly you want. Then enter the new mods directory and copy the "default" folder, rename it, and then edit the file "ModDescription.xml" to have the description you want.
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Edit: The game might show you where its looking if you try to change which mod to use. I've renamed my DA mods folder, and its still trying to look for it where it should be.
Edit: Taking a look at your picture suggests that you are using a vista machine, correct? If so, the game folder might be stored some where else (along with the mods folder). Try opening either impulse or stardock central, and right clicking the game and select "open folder" or something like that.