This post is just in case someone else tries to get WP-DownloadManager to work under WPMU with subdirectories (as opposed to subdomains).

I had to follow the advice given here and replace

“%FILE_DOWNLOAD_URL%”

with

“?dl_id=%FILE_ID%”

in the Download Templates.

Moreover I had to choose “Redirect to File” under “Download Options” and of course use a directory that was actually served.