I recently set up Twonky with exactly the same setup and had the problems you're mentioning. When you installed Twonky, did you do it as superuser (using sudo)? Also, when you copied your media onto your linux system, did you perhaps do it with sudo?
I did that, and when I first ran Twonky everything was fine (because I ran it with sudo as well) but when I added it to session autostarts and rebooted the machine I got the no entry signs you mention.
1. Use chmod and chown recursively on the top level folder(s) of your media library and of your Twonky installation directory to make sure that the user under which Twonky runs has ownership and full rights on all files.
2. Delete the Twonky DB (rebuild doesn't work, even after the chmod/chown) and use the admin page to rebuild the DB.