WordPress MU

I can upload files no problem. They get saved where they should - wp-content/blog.dir/<blog#>/files/..... but they're not appearing properly in the editor. I just get the text alt title. The link created goes to http://sub.domain/files/..... not wp-content etc - so I'm betting I'm missing something in my htaccess file to redirect. But what? Here's what I have:

RewriteEngine On
RewriteBase /

#uploaded files
RewriteRule ^(.*/)?files/$ index.php [L]
RewriteRule ^(.*/)?files/(.*) wp-content/blogs.php?file=$2 [L]

RewriteCond %{REQUEST_FILENAME} -f [OR]
RewriteCond %{REQUEST_FILENAME} -d
RewriteRule . - [L]
RewriteRule  ^([_0-9a-zA-Z-]+/)?(wp-.*) $2 [L]
RewriteRule  ^([_0-9a-zA-Z-]+/)?(.*.php)$ $2 [L]
RewriteRule . index.php [L] 

# Rewrite http://www.domain.com to domain.com
RewriteCond %{HTTP_HOST} ^www.(.*)
RewriteRule ^(.*)       http://%1/$1 [R,L]

The www bit got removed and placed with the code between versions.

Actually that's the way it's suppose to be. Example:

http://sulz.daria.be/files/2007/03/untitled1.JPG

Here's my htaccess:

RewriteEngine On
RewriteBase /

#uploaded files
RewriteRule ^(.*/)?files/$ index.php [L]
RewriteRule ^(.*/)?files/(.*) wp-content/blogs.php?file=$2 [L]

RewriteCond %{REQUEST_FILENAME} -f [OR]
RewriteCond %{REQUEST_FILENAME} -d
RewriteRule . - [L]
RewriteRule ^([_0-9a-zA-Z-]+/)?(wp-.*) $2 [L]
RewriteRule ^([_0-9a-zA-Z-]+/)?(.*\.php)$ $2 [L]
RewriteRule . index.php [L]

I have the same problem the main domain is http://actorsblognetwork.com that is where the main mu program resides, in the root. FYI we are hosted at dreamhost. under its mu control are 8 other blogs. when I upload a pic using the editor for actorsblognetwork.com it uploads it to http://actorsblognetwork.com/files/2007/09/ladder.jpg . that is the end of it.. it only gives me a path, no pic. I cannot see it from a browser when you go to it, yet I can ftp it down and it is fine. If I upload a file say for one of the blogs, http://actor-preneur.com it uploads the file and shows me a path but no pic. I dont get it? Took over this job from someone who has had this problem since June and they could never fix it either.. What do I need to do?