Getting these errors can't upload images

Okay so I installed my master network on root as normal works great. I then installed an add on domain and installed the wordpress in a separate folder again all works great. However I'm not able to upload images for some odd reason.

“favicon-gear.png” has failed to upload due to an error
Unable to create directory wp-content/uploads/2012/10. Is its parent directory writable by the server?

I've already checked permissions. I've reinstalled everything and still won't work can't get passed this. Something with the network or possibly that it is a subfolder of my main network. Everything is installed there and the rest of the system works just can't upload any images. Any help is much appreciated.