Melita,
I have created a folder with some prj files and placed that it the favourites folder (C:\Users\hornbydd\AppData\Roaming\ESRI\Desktop10.2\ArcMap\Coordinate Systems).
When I expand Favourites in the Coordinate System tab I can see it! Great but...
Your description also seems to suggest I can add to the tree structure in coordinate system tab a folder with prj files from another location. So I create a folder called c:\temp\Approved with some prj files, I add a folder connection through the Catalog window then go to the import button on the Coordinate System tab and select my folder. Nothing appears to happen. I am using ArcGIS 10.2.1 on Windows 7.
I think your first solution will work for the person in question. Thanks for your help.
Duncan