It needs to be in a PPSSPP folder inside whatever you set your system directory as. That folder should already exist in your system folder, since that's where the core keeps save data. It would look something like this in Explorer:
That's the bare minimum of stuff you need there. The core can also use internal PPSSPP shaders by changing a core option. So you'd need the shaders folder from standalone's assets in there for that to work.
The error about stuff needing to be in assets is wrong. It says assets because it's coming from standalone PPSSPP's code and the libretro fork is shallow, so they didn't change what the error says.
That's a known error already listed as an issue on git:
https://github.com/libretro/libretro-ppsspp/issues/22