Image Manipulation Problems

[eluser]sshueso[/eluser]
Hello All,
I am trying to use the image manipulation class to make thumbnails just after the raw images are uploaded, but I keep getting this error msg:
Unable to save the image. Please make sure the image and file directory are writable.

I have set the uploads folder permissions to 0777 but every image that is uploaded within this folder reverts to 644.

I am running Mac OSX10.5.7, My pathing seems correct and I am using both a local server with MAMP as well as account with Dreamhost.

I have tried chmod() function to no avail, I have set the uploads folder to inherit permissions to all included files (on mamp server), I am at my wit's end.

Any help is greatly appreciated.

my code is as follows:
//$img_path is from 'file_name' data from uploaded raw image
$thumb['image_library'] = 'gd2';
$thumb['source_image'] = './uploads_liquor/'.$img_path;
$thumb['new_image'] = './uploads/'.$img_path.'_thumb';
$thumb['create_thumb'] = TRUE;
$thumb['maintain_ratio'] = TRUE;
$thumb['width'] = 75;
$thumb['height'] = 50;

$this->image_lib->initialize($thumb);

$this->image_lib->resize();
if ($this->image_lib->resize())
{
echo 'image resized';
}
else
{
echo $this->image_lib->display_errors();
}