Image handler and photo permissions

It appears that this person's site is a mess. She is using image handler (Not sure what version - I need to know how to find out what version) and her site is wide open with alot of directories set to 777. I tried to change the permissions but they wont allow it to be changed? She is in dire need of upgrading her version of zen cart as well, but I am not too familiar with image handler, so, I needed to check on that part first. Can anyone offer any suggestions/pointers?

UPDATE: Here is the info I get from ftp, when I try to change the permissions:

Status: Set permissions of '/public_html/images/Custom_Orders' to '755'
Command: SITE CHMOD 755 Custom_Orders
Response: 550 Could not change perms on Custom_Orders: Operation not permitted
Status: Set permissions of '/public_html/images/NEW' to '755'
Command: SITE CHMOD 755 NEW
Response: 550 Could not change perms on NEW: Operation not permitted
Status: Set permissions of '/public_html/images/New_Fabric_Selections' to '755'
Command: SITE CHMOD 755 New_Fabric_Selections
Response: 550 Could not change perms on New_Fabric_Selections: Operation not permitted
Status: Set permissions of '/public_html/images/1174.jpg' to '644'
Command: SITE CHMOD 644 1174.jpg
Response: 550 Could not change perms on 1174.jpg: Operation not permitted

 
Im suspicious that she may be hacked?  Is there anyone that is interested in taking this project on and if so, you can send me a private message for the rates you would charge and I can get with the client to see if they are interested. 
 
IF I POSTED THIS IN THE WRONG PLACE, let me know! 
 

What kind of server is the site hosted on.

Its on a linux server.
Zen Cart 1.3.8a

Patch: 1::

Database Patch Level: 1.38

She is getting an error with this:
editors/htmlarea/plugins/ImageManager/manager.php#