Thanks for the info Steve. There is something that's not working though. Here is what I did.
Logged in as a regular user, uploaded a file.
Checked the repository web page, DB table and file system, everything was there.
Logged in as Administrator, approved the file
Checked the repository web page (fine), DB table (fine), file system (file is gone, image for file is still there)
On the repository web page, click to download, get the permissions error.
As mvale and I said, making the folder for unapproved or approved items different fixes the issue.
MVale, Steve stated in another thread that the unmoderated uploads funtionality wasn't working and it should be fixed in the next release. I hope that also fixes the problem that users can't update/modify there uploads. (get a blank content page when they click the little pencil)
BTW, thanks for the awesome module.