I have given frestyle/images because this is the relative path of the screenshot that you gave us.

I don't know which are the real directories on the disk but as explained you have to use a relative path and not a full path.
So enter the relative path to the images directory that you created for your slave site (I don't know your specific name).
Otherwise and this is the most frequent case, when you deploy a slave site into a specific directory with specific /images directory (action = copy) then you can let the field empty.

I have no idea what you are talking about. In none of the pictures did I mention "frestyle/images".

In any event, this seems to be (yet one of many) JMS bug's. I was finally able to fix the issue by restructuring and moving my entire file system to allow it to use JMS's default settings which seem to be the only file system structure that works in Joomla 2.5. It only works if you have the slave sites set up directly under the master directory in the "multisites" folder. You can't deploy slave sites in independent folders as you state in your tutorials/manual or as it appears in the configuration settings. It plain just doesn't work any other way.

Now I am working on yet another problem with JMS. The New Problem: It appears that you can't have Slave Sites set up with "Search Engine Friendly URLs" in global settings of Joomla 2.5 and use "MultiSites Category List Layout" menu item.
When I use "MultiSites Category List Layout" menu item is shows the initial category list, but when you click on a specific category you receive a "404 Category Not Found" error. I've refreshed the cache, purges files etc etc etc. Nothing works except to turn off "Search Engine Friendly URLs" in Joomla Global settings. And that sucks.

Do you have any insight on how to fix this issue or does JMS just not work with SEO?

The "frestyle/images" is the value that you gave in the screenshot. It is not something that I have imagine. I have just provide you what I think is the relative path based on the value that you provided in your screenshot.

Concerning the 404 and SEF, as you can read in this forum, you have to check the .htaccess "rewritebase".
So if none of the SEF is working, the most probable place to search is the .htaccess "RewriteBase" value.

Sometime, you have to put the "rewritebase" in comment
or set with "/" value
or set with a specific path.

Please check the screenshots again because "frestyle/images" is no where on any of the screenshots and you confused the heck out of me when you referenced it.

One of the folders is set at "audubonlifestyles/images". Was that what you meant to type instead of "frestyle/images"??

Thanks for the pointer in the rewritebase in teh .htaccess.... I'll take a look at it and see if I can't get it working.

.htaccess basepath did not fix the problem.

But... I've found the answer, but I don't know how to fix it.

With SEO turned on the slave site it rewrites the Urls for the articles in categories list view incorrectly to:

"http://{slavesite}/component/content/category?id=xxx" which produces a 404 error.

however if I type in the url manually the way it should be rewritten with SEF it works.

"http://{slavesite}/resources/sustainability-newsletter/116-summer-2012"

So the question is how do I get it to rewrite the urls properly?

Ok. I decided to just buy and install sh404sef to try and fix this issue because I read that JMS worked with sh404sef, but it doesn't. It works with single articles, but it does not work with Category Lists. It goes to the Category corretly, but doesn't link to the individual articles within the Category List.

Joomla version 2.5.6, JMS version 1.2.87, and sh404SEF version 3.5.1.1299.

I've installed all the JMS patches including the ones that are supposed to patch sh404sef, but it does not fix the issues.

I'm getting very frustrated that I can't get SEF to work on my JMS slave sites no matter what I try.