WordPress inside WordPress – file uploads fail. Is it htaccess?

I’ve installed WordPress inside the root folder of another WordPress installation:

http://www.domain.com (full wordpress install)
–www.domain.com/store (full wordpress install)

The two sites are working fine but I had to mess around with the htaccess files for both sites to get them working without any issues. However, there is one issue that remains. We can’t upload images to the “sub-site” or “store” site when creating new posts or pages. The main site works okay and we can create the text and content of the store site okay. WordPress just can’t upload files to the sub-site.

Is this an htaccess issue? Or is this something with the web server not being able to write to this directory? The web host says it’s my problem to deal with.

Any help appreciated.
Thanks,
Bob.