A lot of people have complained about Imagecache not creating images in the correct folder, or the preview (imagecache_sample.png) doesn't work. Most likely these are individuals that have upgraded from a previous Drupal version, or fresh install with their old 'files' data directory.
Imagecache NEEDS the proper htaccess options. Older versions of Drupal do not have this and cause the module to act up. Before you drive yourself nuts and try implementing code hacks, try this.
1. Go into your 'files' directory (sites/default/files) and delete or rename your .htaccess file.
2. Login to your drupal site and navigate to the file system admin. (yourdomain.com/admin/settings/file-system)
Drupal will automatically create a new .htaccess file in your files directory once you visit the file-system admin page.
3. Verify a new .htaccess file has been created in your 'files' directory. It should now look like this:
SetHandler Drupal_Security_Do_Not_Remove_See_SA_2006_006 Options None Options +FollowSymLinks
4. Now try imagecache, everything should work!
This issue is attributed to deprecated entries in your ../files/.htaccess file from older installations of drupal and not a bug in imagecache.