You should use the FM designated method for uploading a file to FMS which is to go to the file menu in FMPro and select Sharing > Upload to FileMaker Server. This will ensure that all your permissions on the database file are correct.
Hi Chris. The reason I am using the manual up load is that when I use the upload from within filemaker the process runs for a while then stops with the error "File upload failed" no other information is available, the log file in FMS does not provide any info on why it failed. I found that if followed the procedure for placing the file in the database directory manually and changing permissions it worked fine. So while not ideal I have used this. I would also like to know why the FM upload fails but that is another thread.
It may very well be related though. Because part of what the upload does is the same as you are trying to do manually: assign the right privs at the OS level.
I would uninstall FMS, rename or delete the stray 'filemaker server' folder that is left behind, reboot and reinstall FMS.