/* This is my plugin activation_hook. What am I doing wrong? Why are the options not being updated correctly? */
function cud_install_options(){
    $defaults = array(
        'custom_upload_dir' => '',
        'all_parents' => true,
        'flatten_hierarchy' => false,
        'only_leaf_nodes' => false,
        'only_base_nodes' => false,
        'test_ids'  => '-1',
        'template' => ''
    );
    $old = get_option('custom_upload_dir');
    if(is_array($old)){
        if(!empty($old['template'])){ //update deprecated placeholders
            $newtags = array('%post_id%','%postname%','%author%','%monthnum%');
            $oldtags = array('%ID%', '%post_name%','%post_author%','%month%');
            $old['template'] = str_replace($oldtags, $newtags, $old['template']);
        }
        $defaults = array_merge($defaults, $old);
    }
    update_option('custom_upload_dir', $defaults);
}