[Dj Smuggla]

I done what you said:
create a 'tmp' subdirectory under your main hosting directory and chmod it to 777. Then in the Admin CP set "Upload In Safe Mode?" to 'Yes' and point the "Safe Mode Temp Directory" to that directory. If you placed the tmp directory in the right place, the path to the Safe Mode Temp Directory will be:

/home/yoursite/tmp

Admin CP -> Settings -> Options -> Server Settings and Optimization Options -> Safe Mode Temporary Directory

Admin CP -> Settings -> Options -> Server Settings and Optimization Options -> Safe Mode Upload Enabled -> Yes
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This is what it said when i went to maintenance > disagnostics > upload

Pertinent PHP Settings
file_uploads: 	On
open_basedir: 	/home/httpd/mydomain.com/httpdocs:/home/httpd/mydomain.com/mydomain.com:/home/admin/:/tmp:/usr/share/pear:/var/lib/php/session/:/home/kloxo/httpd/script
safe_mode: 	Off
upload_tmp_dir: 	/tmp/
upload_max_filesize: 	2.00 MB

Results
No errors occurred while opening the uploaded file for reading. You should be able to turn off the "Upload In Safe Mode?" option without any adverse effects.

Server Settings
Safe Mode Upload Enabled = Yes
Safe Mode Temporary Directory = /tmp (chmoded to 777)

Avatars:
Avatars are currently being served from the filesystem at ./customavatars (chmoded to 777)
Profile pictures are currently being served from the filesystem at ./customprofilepics (chmoded to 777)
Signature pictures are currently being served from the filesystem at ./signaturepics (chmoded to 777)