Error: "Before you can upload your import file, you will need to fix the following error:"

My multisite was set up by wp.mu (I just wanted to save myself some time!) - I just created a new blog and tried to import content to it but I got the following error:

Before you can upload your import file, you will need to fix the following error:

Unable to create directory /home/[redacted]/public_html/wp-content/blogs.dir/4/files/2011/08. Is its parent directory writable by the server?

I checked the directory permissions - blogs.dir was at 755. I changed to 777 - still no luck (so quickly changed back to 755).

Obviously some of my users will want to import existing content as well. How do I make this work?