Upload / File Management - Locations are wrong!

I am having a couple of issues with the file upload and management on HTML edit during some tests.

Site Structure:

The site is in a subfolder of root - called none other than "test". All site files and folders are uploaded here, and I am leaving the root folder alone since a current site lives there. I then created a folder called "uploads" (test/uploads) and gave it 777 permissions.

HTML Edit Config

HTMLEdit is set to allow file uploads, and the directory is set to "uploads".

When advanced editing is turned off - this works fine. All images are going to "uploads" and all files are going to "uploads/files". GREAT!

When advanced editing it is turned on - it doesn't work right. The file browser now shows no images - but the files still work right. When I upload an image, it says it is successful, but no image appears in the file browser. HOWEVER - the image does appear in the HTMLEditor image dialog, and will insert appropriately. It appears, the image is being uploaded to a new directory in ROOT called "uploads". Why would images go to Root > uploads and files go where they are suppose to "root > test/uploads"?

Am I missing something. Will HTMLEditor not work properly when the site is actually in a subfolder?

Any suggestions would be appreciated!