Well, by the numbers:
I took a good look at phpinfo, and everything looks “normal” there, I know of no “borkedness” in 1.08 that could account for your problem, one-click is pretty simple, php4 /CGI is the easiest configuration to get working correctly, I mentioned the “anecdotal” possibility of 755 permissions maybe working better than the 775 (which, by the way, in my latest Joomla installations is only set on the cache directory), and the site works well.
(I loved your Great gmail adventure…you should have gotten something for your efforts!)
It is especially puzzling since the site was working fine until today. One would think that something had to have changed for it to go “paws up”. I’m wondering if there could be any relation to the “rumored” mySql updates taking place on some servers today (see the thread about phpMyAdmin on this forum).
Nothing in the error logs looks relevant.
I’m a little confused though. If you can’t log-in, how can you get to the back-end to have it crash when you try to save content? Or can you “log in” as administrator, but can’t login to the front end as a user?
You have not made any config changes, like turning on SEF urls or modifying your .htaccess, have you?
I’m keeping on looking…