Not sure about the NSLU os, but if its init.d script is in any way similar to the Debian one, the mt-daapd process will NOT be started as the user you’ve used to log into the sell, but as the user specified in /etc/mt-daapd.conf, where you’ll find the default setting runas = nobody.
So it’s nobody, not root, who needs access to those folders!
Rons description should have changed permissions correctly… btw, what about to the path to this location? Imho data and public need to be visible (a+rx) as well – to nobody, not root.