I have Contributor set as the overall default in BP, so that's not the issue. When users join the group, they're not automatically set as contributors and therefore can't add posts.
Another issue: the buttons are messed up in the Group Blog settings. Under Default Moderator Role it lists Editor and Author twice and then the button for Contributor (for Default Member Role) is on the moderator line. So I don't know if I'm even selecting the correct default and maybe this is leading to the 1st problem.
Using BP 1.1.3 and GB 1.3.1