not able to insert images through Media Library

Hello,
Thank you for your kindness and help with this matter.

My server is Directnic (sucks!)
When I tried to upload an image, it gave me the good old Unable to create directory…Is its parent directory writable by the server?
So I read through the WordPress help docs for about 3 hours, tried everything. Yes, changed the “wp-content/uploads” in Media Settings.
Then I changed the permission of my (uploads) directory to 777. I know this is dangerous, but I was frustrated.
So finally it let me upload my photos and I can see them in my FTP client and in the WordPress Media Library.
Now I can’t insert them into my posts.
I click on the image, select “show”
The path looks great next to Link URL
I tried to insert the full size photo into my post, but when I click “Insert into Post,” I get a Error 404: File Not Found, even though I see it in my FTP.
Also, in my FTP there are 8 versions of my photo (different sizes) plus the original one. In the size option in Media Library, it only gives me thumbnail, medium and full size, large is greyed out.
When I click to change the size of photo I want to insert, the Link URL doesn’t change.
I know something is wrong with the path, but I don’t know how to fix it.

NOW,
I went on the WordPress live chat and a nice guy helped me for a hour, to no avail.
He said the path of my image had a double // see between wordpress and wp-content

https://tumultimedia.org/wordpress//wp-content/uploads/2011/09/Julia-150×150.jpg

I put the picture in manually and it worked. But I need to do this automatically b/c my site is a photography website = large amount of photos.

So in my ftp, you can see the folders and the pictures are there!

Here’s a hint though, which makes me believe that this has something to do on my server side. I tried to upload WP Flash Uploader and it gave me this warning (I posted a screenshot to my site:)
https://tumultimedia.org/wordpress/?page_id=2
When I click on create. htaccess it does nothing.

Can anyone help me with this mess?
Much thanks.