The subcategory permissions are normally hidden you have to click something to reveal the permission options for subfolders. I'll have to see if the group im cofounder of can fix the admin area access so i can figure out what that button was again lmao.
ok on the gallery area click the show all folders option and see what those are set to. that is where the gallery's subfolder permissions are set. just setting the gallery itself wont actually set those properly. It is strange though. Normally the option wouldn't even be there if it were set wrong but for me it is i just get that error message. i'm not sure what permission in there could be causing that but it must be in the subfolder permissions since those screenshots seem about right for the main settings.
For some reason I either didn't notice show all folders, or I didn't mentally attribute that with allowing submission/contribution on individual folders. I think it should be good now.