Image Handler 4 (for v1.5.x) Support Thread

[algerdes]

Good evening folks.
I have one that is driving me crazy.
FYI - I've read the complete install instructions (again).
FYI - I've read this complete support thread (also again) and have not found this one. So here goes:

Our image files are mass uploaded into the following folder structure:
images/inventory/product-sub-directory/productname.jpg
(e.g.
images/inventory/mtj0178/mtj0178.jpg (product 178 primary image)
images/inventory/mtj0178/mtj0178_1.jpg (product 178 second image)
images/inventory/mtj0178/mtj0178_2.jpg (product 178 third image)
images/inventory/mtj0180/mtj0180.jpg (product 180 primary image)
images/inventory/mtj0180/mtj0180_1.jpg (product 180 second image)
etc.)
All products that were in place before the installation of IH4 work wonderfully. IH4 found all of them, created the necessary images (in bmz_cache), and properly passes them to the viewer when needed.
Unfortunately when we upload a new set of images to the site, then edit the new products, the images will not show up.
The image listed in the edit field is correct, and if I go to that directory (using FileZilla) the image is indeed there and accessible.
I've verified that all directories under bmz_cache and images have permissions of 755. (I even tried 777, with no luck.)
Since we have too many images to do one at a time, we use FileZilla to upload to the site directly, then point the image to them (as above.)

Using IH4 to upload the images, they are placed in:
images/inventory/mtj0178.jpg
images/inventory/mtj0178_1.jpg
images/inventory/mtj0180.jpg
images/inventory/mtj0180_1.jpg
etc.
and not in the directories that we wish to have them in.

Does anyone see what I'm not seeing here as to why the images will not show up?
Thank you for your time and wizdom.
ALG


P.S.
I have noticed that in all instructions there are only two directories deep:
/images/doodads/silver_doodat1.jpg
/images/widgets/red_widget.jpg
and so on.

Are we limited to only 2 levels deep in the directory structure?
ALG