[There is no current general resolution to using directory-reserved paths, but it's surely possible with custom Apache rewrite rules-- apparently everyone concludes (as i am right now) that it's not worth the effort!]
Partial Resolution
To .htaccess, add:
# Allow the modules path to be used by Drupal for the modules chapter.
RewriteCond %{REQUEST_URI} ^/modules/?$
RewriteRule ^ index.php [L]
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