I set the album and userpics folders to ../mambo/images/stories/albums/ ../mambo/images/stories/albums/userpics/
(basically I copied the original directories to my mambo stories directory)
during a single file upload I received the following error:
Failed to create directory ../mambo/images/stories/albums/../mambo/images/stories/albums/userpics/10001 !
All image folders are set to 777 and the upload works with the albums folder set in default location.
Maybe a small bug maybe just me.
The userpics path should still be userpics, it is just the name of the folder within the albums directory, not a complete path to the userpics folder itself.
That did the job.