Imagemagick stops working when running drupal from www.example.com/drupal

Hi.

I just went online with a site that i had built in a subdomain dev.example.com. I used the normal approach of modifying .htaccess and settings.php so that the site is shown as www.example.com instead of www.example.com/drupal . The approach is detailed here http://drupal.org/node/135206.

Everything went fine except for imagemagick which stopped working. The imagemagick version information is still correctly showed on the imageAPI configuration page so I assume that drupal finds imagemagic correctly on the server. When i try to change an imagecache preset the imagecache_sample.png does not show at all. There is just a path to the sample. When I edit a node that has image contet i get the following error:

# ImageMagick reported an error: convert: unable to open image `sites/default/files/news/pauliinantaiteilijakuvat_208_small.jpg.crop_display.jpg': @ error/blob.c/OpenBlob/2484. convert: missing an image filename `sites/default/files/news/pauliinantaiteilijakuvat_208_small.jpg' @ error/convert.c/ConvertImageCommand/2919.
# ImageMagick reported an error:

When creating a node with two new images i get the following:

# ImageMagick reported an error:
# ImageMagick reported an error:

If I change over to GD2 it works fine again. I want to use imagemagick for a much better image quality. GD2 makes images too blurry when scaling.

I'm not really if this is a bug or just something I missed in the .htaccess rules. Do i need to add #RewriteCond %{REQUEST_URI} "/folder2/" type of exception for this??