This is what I just did on a fresh v1.3.7 install:
1. Install Zen Cart normally, with demo products. In this case it went to /home/yellow/public_html/zencart
2. Set file/folder permissions as per normal.
3. Move the "download" folder to /home/yellow/download (outside webroot)
4. Edit /home/yellow/public_html/zencart/includes/configure.php
Code:
define('DIR_FS_DOWNLOAD', '/home/yellow/download/');
define('DIR_FS_DOWNLOAD_PUBLIC', DIR_FS_CATALOG . 'pub/');
5. Edit /home/yellow/public_html/zencart/admin/includes/configure.php
Code:
define('DIR_FS_DOWNLOAD', '/home/yellow/download/');
6. Log into admin ... Admin->Catalog->Downloads Manager ... everything's green.
7. Go to storefront, find a download product, add to cart, checkout paying via Money Order.
8. Go back to admin, and change order to "Processing" status.
9. Back to store ... order is now released. Download links appear in My Account. Download files fine.
For the sake of curiousity, I also tried:
10. Create a new product.
11. Use FTP to upload a new file to the /home/yellow/download/ folder: balloon.zip
12. Edit the new product's attributes.
13. Add the "balloon.zip" filename and click Insert. Green light.
14. Test purchasing the new product. Same procedure as above, steps #7, 8, 9. Downloads fine.
What have you done differently ?