Well, looks like I was able to solve this one myself - but for anyone else's benefit, here's what I did to resolve.
Using Plesk 8.3 and installed wordpress 2.7 for the first time clean from the download site here at wordpress.org. As discussed above, the error message kept coming up when trying to upload media files using wordpress dashboard. In looking into my httpdocs file using Plesk File manager, I noticed that the FTP transfer to my server did not include a /uploads directory in the wp-content directory. so, i created the directory /uploads and changed the read/write/execute settings to check marks for owner, group, and others. I tried changing them one at a time but continued to get the error message until all were checked.
This resolved the issue but I would, however, like anyone's comments regarding whether my site is now less secure and any other workarounds you may recommend. Thanks