Photopress not reading & writing to directory

I am having a HUGE problem with photopress on 2 websites I run (using WP 2.0.2 & 2.0.5). No matter what I do, I cannot get the programme to read and write to the folders (trying to get it to wp-content/uploads/photos).

I have CHMOD 777 for everything I can think of, deleted, and created new directories, everything.

The reason I know that it is wordpress is because I have “Post Avatars: plugin installed, and that reads my avatars directory just fine (which is wp-content/uploads/avatars).

Please please please will someone please point me to the right direction I am TEARING my hair out!!!