The error message you're getting isn't creating any problems. It's just trying to delete the original size image as well, which of course isn't there. If you'll look in your editimage.php file for three instances of 'unlink' (all three will be in a row) and add a @ sign in front of them then that will take care of the error at the top of the screen.
For the permissions issue, try looking for this code:
Code:
Content visible to verified customers only.
Replace with this:
Code:
Content visible to verified customers only.
And that should take care of the problem.