This is really interesting as I've never encountered it before (from other hosting providers)
Basically, the problem is now solved by changing the identity (impersonation) element in Web.Config file.
My understanding is by default (not specifying in the Web.Config), impersonation is set to false. For some reason, under JodoHost environments, it is set to true which caused DNN and my test page to stop working when trying to create a directory under one which had been granted full directory access.
The issue is fixed when I had to explicitly specify impersonation to false for it to work. It is now working like a charm and it can do what I needed for DotNetNuke to do. This might be useful for other looking to host DNN in JodoHost