ok. so this has taken me:
100's of blog posts, forum entries.
If this helps anyone then great.
Even though I had set permissions for folders to 777 there wasstill the same error of not being able to create/move file to uploads/2009 - it did not matter what I did - delete files, recreate them in FTP.
In the end I had to create the Folder w-pcontent/uploads (or whatever you want to specify it as in the misc settings page) manually in my DB manager (plesk)and NOT via FTP. This is due to the pache server creating the folder via FTP and not me - therefore different OWNER.
So in essence do not create the folder via FTP d it manually on your DB.
Phew. Sorted now I can do the simple job of blogging.