Anna,
It'll be something like this :
create.dir("NewDir")
diffreport(xset7, "KO", "WT", file="NewDir/outputfile", eicmax=1000)
If you want to go back up one level/the directory before then it's ../ So...diffreport(xset7, "KO", "WT", file="../outputfile", eicmax=1000)
##or
create.dir("../diffreportsDIR")
diffreport(xset7, "KO", "WT", file="../diffreportsDIR/outputfile", eicmax=1000)