Thanks xenboy for this thread.
Solve my troubles also.
@bfarber
the message that is prompted on the dashboard says that /cache/tmp needs to be writable.
if you then CHMOD777 the tmp folder. everything appears in lo-fi.
the problem is then that you need to disable minify in the CPU Saving & Optimization settings as well.
it is NOT automatically turned off.
lofi = CHMOD777 and setting "on"
normal = CHMOD 777 and setting "off"
normal = CHMOD 755 and setting "on"