This valid path issue was also vexing me until earlier today. I have an Xserve G4 server with an Xserve RAID. I put my "backup" folder on the RAID, but couldn't get a valid path *until* I changed the owner of that folder to "fmserver" and the group to "fmsadmin". FM7 Server Admin then reported the path was valid.
So, in summary:
Default database folder = filemac:/Server HD/Library/FileMaker Server 7/Data/Databases/
Default backup folder = filemac:/RAID Data/FMProDatabases/Backups/
Everything is reported as "valid" on my setup.