Avatar upload fails

I am trying to create a Buddypress group and receiving an error when I try to upload an avatar for the group. The error in question:

Upload Failed! Error was: Unable to create directory /var/www/wp-content/blogs.dir/1/files/group-avatars/1. Is its parent directory writable by the server?

Technical Info:
WP 3.3.1 MultiSite with Subdomains
Buddypress (on subdomain BlogID '3')
Blogs MU 1.2.9
Hosting with Hostgator

I was surprised that the avatars for Buddypress groups were thrown in the root blog's folder, but wasn't sure if this had anything to do with it. Both wp-config and bb-config refer to Buddypress being on Blog 3. Wp-config has:

define('WP_DEBUG', false);
define('WP_ALLOW_MULTISITE', true);
define( 'MULTISITE', true );
define( 'SUBDOMAIN_INSTALL', true );
$base = '/';
define( 'DOMAIN_CURRENT_SITE', 'mydomain.com' );
define( 'PATH_CURRENT_SITE', '/' );
define( 'SITE_ID_CURRENT_SITE', 1 );
define( 'BLOG_ID_CURRENT_SITE', 1 );
define ( 'BP_ROOT_BLOG', 3 );

and bb-config has:

$bb->wordpress_mu_primary_blog_id = 3;

Buddypress setting Disable avatar uploads? is set to No.

Any thoughts why I'm getting the initial error when trying to upload the avatars?