No, the only folder/file you have to have is 'static.php'. Now, I noticed on my webserver that if the file was named 'static.php', the rewrite rule wouldn't apply; instead, it would call 'static.php' with the following values:
_SERVER["REQUEST_URI"] /static/contact
_SERVER["SCRIPT_NAME"] /static.php
_SERVER["PATH_INFO"] /contact
_SERVER["PATH_TRANSLATED"] C:\Program Files\Apache Group\Apache\htdocs\contact
_SERVER["PHP_SELF"] /static.php/contact
This is due to the fact that I have "MultiViews" enabled ("Options MultiViews" in the <Directory> directive).