I did go ahead and edited the conf file, and that seemed to help but I was still getting an error.
So I started changing permissions to straight nobody.nobody and the sample index.html was coming up fine after that, however now my permissions aren't setup correctly.
The way I had it setup was a user account such as:
/home/user1/ .. etc - other lsws DEFAULT directories
/home/user1/html (the lsws directory to hold the website)
/opt/lsws/testing (symbolic link to the /home/user1/html directory)
I setup lsws to user the nobody user/group.