WordPress MU

When I create new blogs, MU automatically adds /mydomain/ as a path at the end of the domain. This is wrong, and I always need to go in and delete it, but the email that gets sent out to the new user always includes this incorrect path. What have I done wrong to cause this and how can I fix this?

Also, one other pretty irritating problem, I can't upload images. Well, I can, and they are uploaded to the correct folder, but in the media manager, they show as blank white boxes and the URL path is wrong. They are being uploaded to mydomain.com/wp-content/blogs.dir/#/files/month/year
but are being called from mydomain.com/files/month/year

I have changed the URL and upload paths in the dashboard, but they are still trying to call the wrong location. Not sure what to do here either.

It adds that folder in there because it's in the mu site path. Did you change the location of your MU install?

"They are being uploaded to mydomain.com/wp-content/blogs.dir/#/files/month/year
but are being called from mydomain.com/files/month/year"

This is what it;s supposed to do. It rewrites the URL to that.

No, I installed MU and left it there. However, after I installed it, I did change the domain on my hosting account and switched over to Linux hosting.

If it's supposed to rewrite the URL, how do I get the images to show up?

By the way, Andrea, I really appreciate all the help you've offered me lately.

I am having mayor problems installing new blogs on my wordpress mu install it was working fine up until 2 days ago and now it has given me the dreaded "The blog you have requested is not installed properly" now i can see them in the backend superadmin no probs but when i go to each blog´s backend it gives me the same error.
im over at http://etymoblog.com
any help would be great.
Chris