Check out the joomgallery backend configuration. At least, you HAVE to create a kind of ROOT category. This category have to be selected in
configuration manager -> User Access Rights -> User Upload
"Allowed categories"
Select at least your ROOT category. You may also have multiple FIRST LEVEL categories, and select more than one.
Same principle for creation of User-Categories!
Check and read ALL OTHER parameter discriptions. Attention: Some options may disable the visibility of the "user panel" in frontend. The userpanel link is also visible in the CBtab. But a click leads to the actual joomgallery MenuItemID. I think this can be overridden in the configuration somewhere. As far as i know, the CBtab has not much layout options. It would be nice to have a simpler and much more condensed output...
Also important for uploads is the OWNER of the category. To force uploads in OWN categories, see:
"Upload images only on own categories"
You will have to play with all the options to get a suitable result. The user panel and its buttons are not ideal, but thats the way it works till now...