This "internal server error".
Any more details?
Or, is it just a 500 or something?
Also, has your host upgraded a server, or anything?
If they have, or they've been tinkering with it, you may not have full ownership of your files.
Don't worry, if you don't understand that, coz it's a *nix/Linux thing.
Ask your host, just in case. They'll know.
Although you say "I have checked owner/group rights and my host says its fine.", they may have just forgotten about this.