Turning it off ("red") simply disables it. if you want to delete it, there's a Delete button in the sidebar to the right.
To test permissions on uploading banner images, simply use the Banner Manager screen, edit a banner, and click the "Choose File..." button, select your image, and click the button to save/update the banner settings. That'll trigger the upload, and attempt to save your image to the spot on the server which you selected on the banner settings (the default is the /images/banners/ folder).
The red/green button has no relationship to uploading banner images.



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