Installing and upgrading help

OK, it definitely looks like you need this for Lycos:

$CFG->dirroot = BASEDIR."moodle";
$CFG->dataroot = BASEDIR."data";

Yes, you can set it up next to postnuke, but I would wait a few days for 1.0.8 if I were you.

[a few minutes later]

Ah, I just noticed the other new discussion you started where you say it works now. Great.