_image_settings / can't create dir

The following line from _image_settings
$image_path = file_create_path(variable_get('image_default_path', 'images'));
tries to set the image path to images, but will fail for a new installation since file_create_path returns false when it can't find "images" inside "files". The temp_path will be set to "/temp" instead of "images/temp".

This means that, since image_path is false, the two following calls to file_check_directory

  file_check_directory($image_path, FILE_CREATE_DIRECTORY, 'image_default_path');
  file_check_directory($temp_path, FILE_CREATE_DIRECTORY, 'image_default_path');

will fail (or at least the first one, the second one might create a temp directory in root).