I’ve resolved this issue (NG 1.2.2, WP 2.7.1) with a quick and dirty hack to nextgen-gallery/admin/functions.php. Try to change your check_quota() function (line 712) with this:
function check_quota() {
// Only for WPMU
if ((IS_WPMU))
{
$ngg_options = get_site_option('ngg_options');
if($ngg_options['wpmuQuotaCheck'] && $error = upload_is_user_over_quota( false ) ) {
nggGallery::show_error( __( 'Sorry, you have used your space allocation. Please delete some files to upload more files.','nggallery' ) );
return true;
}
}
return false;
}
Don’t know if this fixes your problem, but hope it helps.