Index: taxonomy_image.admin.inc
===================================================================
--- taxonomy_image.admin.inc	(revision 63)
+++ taxonomy_image.admin.inc	(working copy)
@@ -23,7 +23,7 @@
 
   drupal_add_css(drupal_get_path('module', 'taxonomy_image') .'/taxonomy_image.css');
 
-  $files_path = variable_get('file_directory_path', 'files') .'/';
+  $files_path = file_directory_path();
 
   $form['general'] = array(
     '#type' => 'fieldset',
Index: taxonomy_image.module
===================================================================
--- taxonomy_image.module	(revision 63)
+++ taxonomy_image.module	(working copy)
@@ -583,7 +583,7 @@
         }
         // Make sure Cron doesn't delete this file.
         file_set_status($file, FILE_STATUS_PERMANENT);
-        $insert = db_query("INSERT INTO {term_image} (tid, path) VALUES ('%d', '%s')", $tid, $file->filepath);
+        $insert = db_query("INSERT INTO {term_image} (tid, path) VALUES ('%d', '%s')", $tid, variable_get('taxonomy_image_path', 'category_pictures') . '/' . $file->filename);
         if ($insert == FALSE) {
           $message = theme('error', t('Database insert failed. [tid = !tid, path = @path.', array('!tid' => $tid, '@path' => $file->filepath)));
         }