"Path settings" not work

Subscribing. I have the exact same issue, but with Drupal 5.12 / 5.x-2.3.

*** EDIT ***
Did you check your temporary directory (admin/settings/file-system) ? When I set it to a valid directory (It had to be changed, because I was working on a test environement with different paths). It fixes the problem for me at least.

I have the same issue here.

I also get this error when creating a node, (only file field nodes).

warning: array_merge_recursive() [function.array-merge-recursive]: recursion detected in /home/foo/www/includes/module.inc on line 473.

System filesettings are private, with "sites/foo/files" as system filepath.
Filefield settings are to put node foo attachments in folder "foo"

The error was that the subfolder had the wrong permissions. This was shown in the log. I suggest this should be alerted when filefield encounters the permissions error, as it was now, I have to manually update a series of nodes, I only noticed the issue accidentally.

I cannot reproduce with dev. verify your file path permissions are correct.