Post via email – 404 – not found

My blog (www.coo-coofish.com/blog) works great except for post via email. Everything in the codex.wordpress.org/Blog_by_Email is set up and working OK. My posts are delivered to the mailbox, but WP never sees them in http://www.coo-coofish.com/blog/installdir/wp-mail.php. I get my customized blog page, but in the body it just reads “Errpr 404 – not found”. Is this because my blog is installed in a subdirectory? If so, what’s the fix? Also I just upgraded to 2.8.6, so unsure if that’s a problem.