Why are these file errors show up on the site - I have "none" selected in admin
The "Error messages to display" setting only controls whether or not PHP errors/warnings/notices/etc are shown - that particular message is a 'standard' message displayed using drupal_set_message(), with error as the second parameter.

This happens in includes/file.inc, line 891.

drupal_set_message(t('The specified file %file could not be copied, because the destination directory is not properly configured. This may be caused by a problem with file or directory permissions. More information is available in the system log.', array('%file' =&gt; $original_source)), 'error');


Since there's nothing actually throwing an exception the PHP error handling never comes into it, and the message is displayed as normal.