If you have problems with permissions - try this:
for path to your "moodledata" folder you need to use the physical path to that folder:
$CFG->dataroot = 'D:\hshome\xxxxx\moodledata';
I use cPanel over H-SPHERE, I was installed Moodle ver.1.4.4., directorypermissions=0777 and 'moodledata' folder with all read/write permission is outside of my web folder.
In my case - everything working very well...