I noticed after upgrading to 1.0.8.2 from 1.0.7 was that all the cache files are generated in the cache folder directly. Previously, the cache files went into their own sub folders. I suppose this is due to the safe_mode workaround.

So can I now delete all those cache files in the subfolders?

Am I going to end up with a humongous cache folder? Is there a better way to do this?

Yep, you can just delete the subfolders under cache. The cache folder will contain lots of files with the new safe_mode compatibility, but it will be the same physical size as it was before.

Does your server have safe_mode enabled?

Yep. There is safe-mode on the server. So all the cache files will be stored flat in the directory?

By the way, will there be any difference if I chgrp the PHP scripts to group ownership?

Currently it does not check to see if the foldered cache structure would actually work; if safe-mode is turned on then it automatically reverts to the flat folder.

That shouldn't really cause a problem, I wouldn't worry about it too much.

If you want, you can fix how it's done in i.php (or is it functions.php in one of the image parameters functions... one of those). Just remove the safe_mode check if you can get it to work.