Is it necessary to chmod the include dir to it's old settings after installing? right now its 777 for me.
no , include should be Writable (777 or 755 with PHPSuExec)
It won't hurt though to put it back to read-only state after successfull install. Only the albums folder (and everything within it) needs to be writable at all times.
If you need additional logs and web-based plugin installs, you'll have to CHMOD the corresponding folders accordingly.
If your server is configured properly, 777 won't hurt. In rare cases (I repeat: improper server setup), it's safer to have the include-folder read-only.