Define uploads?

I know, I know, this has been covered MANY times in the forums in the past. If fact I've spent the last 3+ hours searching all of the threads on both here and the WP forums and still can't figure out what is wrong.

When I upload a file it is placed here:

http://mydomain.com/wp-content/blogs.dir/1/files/12/2008/file.jpg

But when I view any of the templates they are linking to:

http://mydomain.com/files/2008/12/file.jpg

I've tried changing the "Define Uploads" line in my wp-settings.php file but it does not seem to make ny difference no matter what I change it to.

I've installed 10-20 regular WP installs on this server with no issues at all. Why is MUWP being such a PITA?

I'm ready to pull my hair out, any suggestions? Please?

Oh, I don't use .htaccess (On an IIS box). I know, but it's a work requirement.