"Error creating folder" error uploading image

I am trying to upload an image, but am unable to. When I click on "Send it to the server", I get this error:

Error creating folder "/files/" (Can't create directory).

The problem is, this directory doesn't need to be created. I'm using Drupal 5.5 with FCKEditor 2.5.1. Drupal is installed under a /members subdirectory, and my uploaded files directory is /members/files, which already exists. As far as I can tell, I have the config.php settings correct:

global $Config ;

// SECURITY: You must explicitly enable this "connector". (Set it to "true").
// WARNING: don't just set "$Config['Enabled'] = true ;", you must be sure that only
//      authenticated users can access this file or use some kind of session checking.
$Config['Enabled'] = true ;


// Path to user files relative to the document root.
$Config['UserFilesPath'] = '/files/' ;

// Fill the following value it you prefer to specify the absolute path for the
// user files directory. Useful if you are using a virtual directory, symbolic
// link or alias. Examples: 'C:\\MySite\\userfiles\\' or '/root/mysite/userfiles/'.
// Attention: The above 'UserFilesPath' must point to the same directory.
$Config['UserFilesAbsolutePath'] = '/files/' ;

So I can't determine why it's trying to create a folder that already exists and that has 777 permissions on it. Can anyone tell me how to get around this so I can upload files?

Thanks.