I have seen that others have asked about this on the SMF help pages and come across what they call "CHMOD". I don't particularly understand it very well, but it seems to have to do with forum files modifications in the server.
Add Smiley (scroll down)
It seems one needs to change the permissions for people to be able to upload their own smilies to their forums
How do I use chmod? / What is chmod?
Chmod
.....buuuut the catch from what I can tell, is that it will mean a lot of work for Tom because I am guessing it is a change needed for all who want to be able to upload their own smilies (assuming this FTP program is somehow added).
I have been waiting for about year to have some sort of solution about this but it really looks discouraging.

What I don't understand is why one cannot have the option to create a smiley directories that are writable but having to go through the trouble of having it fixed in some directory some place else. Very very frustrating!