I initially filed this as a bug here (http://issues.civicrm.org/jira/browse/CRM-10200?page=com.atlassian.jira.plugin.system.issuetabpanels:all-tabpanel
), still not sure if it is/isn't, but here's the deal…
I try to save a custom PHP path (the same problem applies for custom templates to) and nothing happens, I've tracked down that lines 90 through 94 in CRM/Core/BAO/ConfigSetting.php seem to be removing all directory settings from being saved into the domain table, comment these out and it works for me.
Now, Lobo says on that bug report that all settings should be being saved into civicrm_settings table, but mine aren't.
So what's going on? I've never had very smooth upgrades (currently on 4.1.2), could there being something fundamentally broken somewhere?