Magic Folders can hide folders on your removable drives - BUT - they will only be hidden on the machine which you used to hide them. They will NOT be hidden on other machines, regardless of whether those machines are running Magic Folders or not.
Removable media will be listed slightly different in your hidden folder list. First will be the drive letter, followed by the name of the CD (or its ID number) in parenthesis, followed by the folder name.
For example: d:(CDname)\HiddenFolder
To enable the hiding of folders on CDs select "Configure/Change Properties" and click the "Allow hiding of CD folders" box.