My apologese,
Aficionado is correct on his chmod permissions.
As stated in the installation you need read and write on just the root and the one folder but not all the your folder.
It specifies during the installation. I won't comment of the 777, but for this script Aficionado is right you should never use 777.
Just to clarify:
In most cases you should not, but some developers may ask you to use it such as Premium Media Script (
http://codecanyon.net/item/premium-media-script/9324018) - which is a Youtube clone site - i too did not use 777 but 775 (on Centos box) and videos uploaded would not play. The support developer need ftp access then came back and said the videos folder need to be 777.
Again, Aficionado is right you should never use 777
Therefore i have corrected my statement for the community...