Thanks Eric, but this does not make sense. Since I placed the CMS folder on the site root (following your installation instructions) then the site files would be above the CMS folder, not in the CMS folder. In fact, I tried changing this line to "CMS" as you suggest and all the file manager showed is an empty "root" folder and an empty "cms_files" subfolder).
So I tried changing this line to just a forward slash (/) but all that showed is all the PowerCMS folders. How do the links to internal pages work in the HTML editor? How can I browse to the site files that are on the site root (at the same level as the "CMS" folder)?