compiled into php:
./configure  --with-apxs=/usr/local/apache/bin/apxs --with-pgsql=/usr/local/pgsql/ --with-mcrypt=/usr/local --with-xml  --with-pdflib --disable-debug

using the following directives in my httpd.conf:
php_admin_value safe_mode 1
php_admin_value safe_mode_exec_dir /usr/local/src/demo/

this expression never evaluates to true:
if(!mkdir($new_dir, 0755)) {
 $error = "The directory could not be created.";
}

the var $new_dir is always a subdirectory of a directory with umask=000 and mod=777 and ownership=nobody.nobody. The class running the code is owned by nobody.nobody. Nobody owns the apache server (v.1.3.27) processes.

If safe_mode is set to false, the mkdir() function works just fine.

Mkdir() + safe mode works just fine under php 4.3 also running under redhat 8.0, with the same compile options, the same httpd.conf directives, the same apache version, and the same directory permissions...aaack!