What follows the SHELL comand within a matched pair of quotes that is not concatenated with + constitutes one parm. So, following that logic, your attempt goes like this:

KiX command - SHELL
Parm for SHELL - 'cmd /c xcopy e:\data1\'+$folder+'\data\netscape\*.*'
second (unsupported parm - 'e:\data1\'+$folder+'\data\Netscape7\ /d /e /c /y /h /r'

If you concatenated the two parms, it would be legal code:

shell 'cmd /c xcopy e:\data1\'+$folder+'\data\netscape\*.* ' + 'e:\data1\'+$folder+'\data\Netscape7\ /d /e /c /y /h /r'

The FAQs are:
Not quite everything you wanted to know about RUN and SHELL
Proper use of quotes
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