I saw a related bug reported below, but I've tinkered for a little while and found a more detailed repro case.
If you create your account and then do 'upload' from the web interface, it says 'your account is not allowed to upload pictures' (and shows such under the status page). If you attempt to use the clients at this time, you will get the error that you don't have enough disk space. Once you've created a gallery, the 'no permission to upload' message goes away on the status page, and the upload page works from both the web interface and the clients. If you delete that gallery, the upload ability still works.
So, it appears you have to create a gallery once for purposes of setup, and then the account will work, regardless of whether or not you actually keep the gallery around later. This isn't entirely intuitive (especially given the 'your account does not have permission to upload photos' error you get on trying to use the web 'upload' page before creating that first gallery!), so I'm assuming it's a bug. :)