Image upload problems for multisite subdomain site

Summary:
I have just recently started multi-site for a work-related website so that the main page could be branched off into a staff blog (using this guide http://codex.wordpress.org/Create_A_Network ). So a subdomain is being used through BlueHost to have blog.domain.org where the original is, of course, domain.org.

The problem is that I can upload images to the new blog site, but inserting them into posts is not working, it just shows the image link broken.

I’ve already read through this post, which most mirrors the problem I am having:

http://wordpress.org/support/topic/multisite-image-path-error?replies=37

(as noted by user in the Ipstenu in that thread, this is an unfortunate case of a large established site going to multisite)

It turns out the problem in that thread was a cache plugin, which I do not have, so I don’t think that’s it.

Details:
So after creating a blogs.dir folder, as suggested, things got messed up.

In the file system, it looks like the images are being uploaded to /wp-content/blogs.dir/2/files/

But when they are uploaded, it says that are at blog.domain.org/files/$year/$month/sampleimage.jpg

I’ve changed the upload path to: wp-content/blogs.dir/2/files
and the Fileuploadurl to: http://domain.org/wp-content/blogs.dir/2/files/ & then http://blog.domain.org/wp-content/blogs.dir/2/files/

Nothing is working, I’ve also tried some of the things mentioned in the above mentioned thread like adding: RewriteRule ^files/(.*)$ http://domain.com/wp-content/files/$1 [L,R=301] to the .htaccess file.

By the way, the .htaccess file currently looks like this since I know someone will ask to see that:

# Use PHP5 Single php.ini as default
AddHandler application/x-httpd-php5s .php

<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /index.php [L]
</IfModule>
# BEGIN WordPress
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /
RewriteRule ^index\.php$ - [L]

# uploaded files
RewriteRule ^files/(.+) wp-includes/ms-files.php?file=$1 [L]

RewriteCond %{REQUEST_FILENAME} -f [OR]
RewriteCond %{REQUEST_FILENAME} -d
RewriteRule ^ - [L]
RewriteRule . index.php [L]
</IfModule>

# END WordPress

Any help would be appreciated. I’m throwing my hands up in frustration. thanks in advance.