Error (-120) downloading apps

I keep getting an error when trying to download/update apps in iTunes (11.0.3) for Mac.
I have traced the problem to the iTunes/iTunes Media/Downloads folder. If I delete this, iTunes recreates it for the first new download but after this is complete, the second, or subsequent download fails with an err = -120. On the pop-up it says "The required folder could not be found."
Any ideas what's wrong. Seems like this only started after upgrade to 11.0.3 version of iTunes.
Thanks.

Just a bit more...
I updated to version 11.0.4 of iTunes but I'm still getting the error!
Ay help would be much appreciated as its a right pain in the whatsit...

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