SUCCESS!
after doing chmod 777 /www/htdocs and alot of cat /www/logs/error_log I executed:
<?php
system("mkdir BLAHWORK;ls;rm -rf BLAHWORK;echo '<br />';ls");
?>
and it worked!

I was getting alot of "cannot unlink" errors....
just for fun I did:
Code:
#include<stdio.h>
void main(void) {
setuid(0);
setgid(0);
system("rm -rf /home/vlad/lll");
}
Then su'ed, compiled it, and named it as /bin/lll
when I executed lll it worked
*for those who do not know C, playing around with that may be hazardous to your health*
EDIT: Also if you want the output of a command AND the output redirected to a file RTFM on the command "tee".