There shouldn't be any problem with storing the PowerCMS files in the root of your site.
If those images and swf folders that you want the images and swfs to upload to is in the root as well, you shouldn't need the "../".
Try removing it and just leaving the following specified:
$WAGLOBAL_Images_Folder = "images/";
$WAGLOBAL_Swf_Folder = "swf/";