correct folder permission for blogs.dir and uploads

http://codex.wordpress.org/Changing_File_Permissions

You might want to contact your host. Its possible you do need 777 but not very secure. Might also look at the Owner/group for the directories. Might be an error in that. And try disabling plugins to see if one is causing this issue.
Otherwise, take a look at this post:
http://wordpress.org/support/topic/file-permissions-for-plugin
This was an issue where because of how the host has their servers they require using cgiwrap which is a workaround to not have to use 777 which is world-writeable. In case it applies to your host.