File System Error on new blog creation

Hey!

Odd thing started happening today.

Running WPMU / BP / Memberships

Scenario -
Visitor creates new Free membership
Blog creation disabled for free members

Admin manually moves Free Member from Free to Paid in Membership CP

New member Logs in and now has capability to create a blog

Member enters blog details then clicks on 'create blog'

Then gets this error message

File System Error: Unable to create directory /home/resument/public_html/wp-content/blogs.dir/219/files. (New Blog Templates - While copying files)

The blog is actually created (a new folder is created in the blogs.dir) but it isn't completely functional - I use the 'Blog Templates' plugin for cloning but not all of the blog parameters are created successfully.

Odd thing is that this has been working just fine and the only changes I've made to the site is to alter some menu items.

I get the same error when I try to create a new site in network admin.

It looks like a permissions error on the blogs.dir folder but it's set for 755 as it always has been. 217 blogs were successfully created prior to this problem springing up.

Any ideas?

Cheers