in the webassist/caching/PG_CachedResize_Image.php file.
change line 14:
$retVal = is_dir($pathname) || @mkdir($pathname, 0777);
to:
$retVal = is_dir($pathname) || @mkdir($pathname, 0755);
and line 360:
mkdir ($cachefolder,0777,true);
to:
mkdir ($cachefolder,0755,true);
also, make sure that the permissions on the powergallery/images/ folder and all files and folders under it are set to 755