Ok, I discoved that a break is yet again a good therapy. The problem was that the path defined in the two line top php code wasn't defining the path for my cms installation. I tried to trick with globals but think it might be better to leave it as it is as this will really stop anybody adding misc content without knowledge of the files. I'll decide on that one later.
With the image files..... I don't seem to have any joy with the upload at all. I don't think it is a permissions issue as I have seen similar issues with blogs before. I can copy a pic from a blog in the content editor and it works fine. Any thoughts appreciated.
Product looks a lot more attractive now but I would still like to know if any chmods are required or is the system bullet proof as is.