had the same problem; on the remote server the 'connectios' need to be set on 777
further when you create a gallery, PowerGallery automatic generates a folder called 1, 2 or 3 etc. That folder has also now wrigting permissions and in dreamweaver or anny other ftp client i could not not change the permission of that folder. I find out that if you delete that folder and create a new one with the same name you can set the permissions to 777 and than everything works fine.
I suggest that Webassist takes a look at this problem.