When attempting to use the "WEBSERVER DIRECT INSTALL" option when verifying support for installing apps in a distribution, I get the following instructions to fix the issue:
You do not have sufficient permissions to install by webserver direct install. In order to assign these permissions, go to the root of your drupal install and type <strong>sudo chmod -R 777 sites/all/modules</strong> Be aware that there are security issues with leaving your site in this state.
Executing the exact code fails as apps still fails to write to the correct directory. However, by executing:
sudo chmod -R 777 sites/
I was able to continue just fine. The documentation for this must be fixed to avoid further confusion.