Okay, got it figured out. Well, a work-around anyway.
Exit from the control console on your e-smith box, either option 9 on the menu or alt-F2.
Log in as root.
Go to 'home/e-smith/files/primary/html' using the cd command. You may need to back out of '/root' first by entering 'cd ..' or 'cd /', then type 'cd /home/e-smith/files/primary/html' this brings you to the root of your website.
Here you can create any directories you want using the 'mkdir ' and 'rmdir ' to delete any you might have that don't work.
After creating them you will need to change the owner to admin from root. To do this, type 'chown admin '.
Alt-F1 gets you back to your console.
Now you should be able to copy your files back in to the newly created directories and everything should work.
*E-Smith developers and other gurus . . . I know little or nothing of linux, just kind of stumble from bits and peices from "Unix for Dummies". Any one of you knowledgable people know a simpler way to accomplish this, please let us know. The probelm seems to arise with the sub-folders I create from my Win98 machine on my e-smith box, but when I create them on the e-smith directly and change ownership to admin, they seem to work.