@Cim:
okay.. here's the deal -- site restore & 1.8.6 upgrade at SAME time = bad bad news.
now ==> it is soo hard for you to figure which of the two big pieces is causing the problem.
does it matter ? yep ! one step at a time...
one step at one time!
you threw in 2 different ingredients at the same time
and now -- what is causing the bad taste ?
kinda makes all the past 2 days' discussions meaningless while u r tryng to chase *two* code-bases chipmunks' tails..
* you shud have only only only done the restore and then screwed with *that only - until everything looked ok..
try to recover to one known devil-point - then fix that.
you got a "bad broken" site ? you definitely not need v1.8.6 right now at all!

I repeat: Elgg root is NOT necessarily equal document root. I rather think /var/www is the document root (if not of your Elgg site's virtual host it still could be of the default virtualhost on your server). Everything inside this folder is exposed to the Internet. This is needed for the Elgg root folder in /var/www/html and the access to these files is secured by the file permissions. But the data folder in /var/www/data most likely is also exposed. This is BAD, especially when this folder is set to 777 permissions. Depending on your server config this could explain your problem when the server restricts access to the data folder for safety reasons. You could try to move the data folder to another location on your server - best would be completely outside /var. Then you also need to adjust the data folder location in your advanced site settings accordingly.

Have you run upgrade.php after the upgrade to Elgg 1.8.6?

Put the following at the top of engine/settings.php:

date_default_timezone_set('MY_TIME_ZONE');

Where MY_TIME_ZONE is a valid PHP timezone

and upgrade.php