I am having the same problem as the OP... I installed/uploaded all files. I can access the arcade with the permission error, same as OP. In the AdminCP, I see the "Arcade" section but clicking any of the links leads to a blank right panel.
So, I can't set group permissions, so... nobody can play.
Please conform that the CHMOD 777 was for the arcade/ and subsequent DIRECTORIES only, and not the files in the arcade directory and sub-directories?
Any other ideas?
--------------- Added [DATE]1323373893[/DATE] at [TIME]1323373893[/TIME] ---------------
Well, solved this... but I'm not sure how.
I'll just post for anyone else who finds this thread under similar circumstances as me... even though I had uploaded the arcade.php file (the correct version) to the admincp directory, deleting it and uploading it again fixed it.
And in case anyone else wants confirmation that it's the directories only to chmod, that is the case.
Your next problem is probably going to involve high scores not posting.

It's a simple fix though with a search in this forum for "token" ... lol