Multisite images not being written to blogs.dir

I am running into an issue with this Multisite install and even though I’ve done them before, I have to install it on this Centos server and they have it locked down pretty good. The admin is not helpful. Anyway, I thought I might be able to bounce some of the things I’m going through off you guys to see if it triggers any possible solutions. So here it goes,

The problem I am having is for the sub-sites, images are not writing to the “blogs.dir” directory when I try to add an image to a post.

Here is the setup

Add to hosts file to view:
66.45.51.110    ctec2.net

Browse to: http://ctec2.net/ to see the primary and http://ctec2.net/kinderconnect/ to see one of the subfolder sites.

Centos box
Multisite subfolder install
AllowOverride All
mod_rewrite is active
running php 5
WP 3.2.1
Permalinks are working
uploads and blogs.dir permissions are set to 775
All plugins disabled
images are written to database, but show broken images on site.
.htaccess contents:

RewriteEngine On
RewriteBase /
RewriteRule ^index\.php$ – [L]

# uploaded files
RewriteRule ^([_0-9a-zA-Z-]+/)?files/(.+) wp-includes/ms-files.php?file=$2 [L]

# add a trailing slash to /wp-admin
RewriteRule ^([_0-9a-zA-Z-]+/)?wp-admin$ $1wp-admin/ [R=301,L]

RewriteCond %{REQUEST_FILENAME} -f [OR]
RewriteCond %{REQUEST_FILENAME} -d
RewriteRule ^ – [L]
RewriteRule  ^[_0-9a-zA-Z-]+/(wp-(content|admin|includes).*) $1 [L]
RewriteRule  ^[_0-9a-zA-Z-]+/(.*\.php)$ $1 [L]
RewriteRule . index.php [L]

If you have any suggestions please let me know.

Thanks,

Wes