Using Nintex Workflow for on-prem SharePoint 2013 and what I want to do is convert a Folder in a document library to a document set. it would appear that no one else on here has wanted to do that - but I am sure that's just because they have had no issues with doing it. I have tried using "Update item" to change the content type - this does in fact change the content type column from Folder to Document Set but doesn't actually change the folder into a document set.
I also tried using the Copy item action after I had changed the content type column hoping it would be clever enough to create me a new item as a document set, but that also did not work.
Open to trying all weird and wonderful, fudgey ways, so hit me up with your best tips please.
I googled the issue of converting a folder to a document set and found this https://archive.codeplex.com/?p=foldertodocsetfix
It is a sandboxed solution to be added to your site collection; the introduction has this note
repairs the MS SharePoint 2010 bug where folders are not correctly converted into document sets during a content type property change
This sounds like the issue you are having - however I don't know if it will work for 2013
I would query the list for all Folders and then for each folder get the files in it (recursive), create a Document Set and copy/move the files into it......