Error: Unable to create directory /wp-content/blogs.dir/20/files. (New Blog Templates - While copyin

After registering a new site through the /alabama network and the /template site at http://dsnamerica.com/alabama/template/wp-signup.php I am getting this error:

File System Error: Unable to create directory /home/www/dsnamerica.com/wp-content/blogs.dir/20/files. (New Blog Templates - While copying files)

First of all, I thought Wordpress wasn't using blogs.dir anymore. Am I wrong?

Secondly, I was using this plugin before without problems so it is probably based on something I've done since the last time I tested it.

I have set up multiple networks now instead of just multisites. Could this be throwing something off?

Also, I do know that our IT team is doing some apache server maintenance today...if that could have anything to do with it.

Any ideas are appreciated.

Thanks