Comment 9 for bug 530193

I've had the same problem. Fresh install of Ubuntu 10.04 server, standard transmission install from repositories.
I followed this writeup:
http://1000umbrellas.com/2010/04/21/transmission-install-on-ubuntu-10-04-server-lucid
including using the same settings.json file

I can write files in the two directories targeted in the .json setup.
I've changed all the directories specified in .json to 766 permission level.

Using the web gui I can upload a target torrent file and it starts to download the torrent data but as soon as it tries to save to disk it gives me the permissions error.