Filedepot -- new folder not working

I have Drupal 7 installed an have added the Filedpot module, read the help file and watched the video. When I try to add a new folder the dialog module shows up but is blank and after a while I get the follow error. Any suggestion on how to fix? Have tried IE and chrome.

Note using fiddler I see a 504 error on /filedepot/ajax/newfolder.
There is no such folder under sites/all/modules/filedepot, is there supposed to be?

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Message from webpage
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An AJAX HTTP request terminated abnormally.
Debugging information follows.
Path: /filedepot/ajax/newfolder
StatusText: error
ResponseText:
ReadyState: 0
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OK
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edit: No errors in apache logs or the drupal log.
Note if I enter the /filedepot/ajax/newfolder directly in the browser it does show data so it is accessible.

edit 2: Ok more testing and two servers now and installed the DEV version... As above if I use fiddler and click the new folder link it shows a dialog window and fiddler shows a 504 error for /filedepot/ajax/newfolder.

On the other hand if I enter the link directly /filedepot/nojs/newfolder it shows page (not dialog) fine and I am able to add folders which show in the main filedepot page.

if I enter /filedepot/ajax/newfolder it returns data as a "get" but per fiddler the system is doing a "post", not sure why.

I am not see any errors in fiddler, drupal error logs, or apache2 error logs.

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Message from webpage
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An AJAX HTTP error occurred.
HTTP Result Code: 504
Debugging information follows.
Path: /filedepot/ajax/newfolder
StatusText: Fiddler - Receive Failure
ResponseText: [Fiddler] ReadResponse() failed: The server did not return a response for this request.Server returned 0 bytes.
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OK
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