or maybe it's not sitemap module issue but my server is not setup for proper RW permissions ?
I was able to correct the 0777 permissions issue: suPHP was off, I turned it on and chmod the folders 0750. All sitemap files are now created in designated folders.

root/zencart/sitemap/ = 5 files
&
root/zencart/sitemap.xml

Most likely >>>>>
When sitemap writes "sitemap.xml", it's trying to create in the root directory... which is not 777.
is a mistake on my part due to the late night hour. Reading my previous post, it's obvious it was trying to create in the zen folder.

Thank you