WIndows Command For-loop

for /f "delims=*" %a in ('dir *.avi /b /s') do @echo md "%~na"

you’ll get the output

"file 1"
"file 2"
"file 3"
"file 4"

Notes:

• The @ prevents the echo commands themselves from displaying, so you see only their output.
• "delims=…" tells for how to parse the lines of output from the dir *.avi /b /s command.  I don’t know why the answer you linked to suggests "delims=*".  But the default behavior is to break lines apart at spaces, so, if your directory and/or file names contain spaces (as you indicated), you should use "delims=" (specifying that there are no delimiters) to get this to work.

In addition, substitution of FOR variable references has been enhanced.
You can now use the following optional syntax:

    %~I         - expands %I removing any surrounding quotes (")
                     ︙ 
    %~pI        - expands %I to a path only
    %~nI        - expands %I to a file name only
                     ︙ 

The modifiers can be combined to get compound results …
                         ︙ 

which explains why %~na is getting you just the file name of the *.avi files whose full names are in %a.  Now try

for /f "delims=" %a in ('dir *.avi /b /s') do @echo md "%~pa"

and you’ll get

"the_current_directory\Folder A\"
"the_current_directory\Folder A\"
"the_current_directory\Folder B\"
"the_current_directory\Folder B\"

From which we can conclude that you want to do

for /f "delims=" %a in ('dir *.avi /b /s') do md "%~pa%~na"

to create the file 1 and file 2 directories under Folder A, and the file 3 and file 4 directories under Folder B.   And, as @dave_thompson_085 points out, you can combine %~pa%~na into %~pna.