I notioced this in 1.7c, and because of it I've upgraded to 1.8. I still am bound by this problem; root can download files, but users cannot.
The issue is the save directory. I've got a directory I'd like to keep most all of my media files in, /usr/share/media (drwxrwxr-- root media). So I set this as my save directory, and ensure users are a member of group media. Likewise, I keep LimeWire in /usr/local/LimeWire (drwxrwxr-- root usrlocal), and put users in the group usrlocal. I know, they shouldn't have write access to the LimeWire directory, I'll fix that later if I can get the whole thing working.
Now, a user tries to use LimeWire and download, and it will certainly eventually fail with 'Cannot download'. Switch the save directory to the users home directory (for example), and all goes well.
Boggle! Why can't he download into /usr/share/media, since he has write access?