Unfortunately, this is due to application developers being lazy and just sticking things in My Docs\Downloads, without checking to see if there is a dedicated downloads folder specified. The easiest solution would probably be to just change the settings in those offending applications to force them to download to the right downloads folder. However, if that would be too tedious, here's another solution.
The NTFS file system has a feature called Junctions or Symbolic Links. These are essentially fake directories which an application sees as if they were real, but they are actually redirecting to another location on the hard drive. Windows 7 has several built in; for example, if you go to
C:\documents and settings\username, it will show the folder that has your user profile, even though it is actually at
C:\users\username. There isn't a duplicate copy of your profile, there's just a symbolic link from
C:\documents and settings\ to
C:\users\. What you want to do in this case is create a symlink from
My Documents\Downloads to the actual Downloads folder.
HowToGeek has an article thoroughly explaining how to create symlinks in Vista using the
mklink command line tool. These instructions should also work in Windows 7. For background information, you may want to read the Wikipedia article on NTFS Junction Points. If you would rather use a GUI tool, there is a free, open source tool called SymLinker which can do it for you, and another one called Junction Link Magic. Once you create the symlink, any application trying to write to My Docs\Downloads will still think it's writing there, when in fact the file is being saved to the actual downloads file.
Note that you should back up any files that were originally in the My Documents\Downloads folder, then delete that folder. Attempting to create a symbolic link for a path which already exists would likely result in errors, and you wouldn't want to lose your data.