I tried to remove the config files and directory, and re-install. Transmission wouldn’t start either from the init script or LuCI, and the error (from init script) stays the same. Upon further investigation - the config directory gets created after starting the init script, and running transmission-daemon -g /tmp/transmission/ manually worked.
Finally, it turned out the problem was in the (experimental) seccomp hardening packages. I didn’t get far trying to solve the problem, and ended up removing the hardening packages (through Foris) - now transmission works.
Should I file a bug about the seccomp issue somewhere? (I’m on 4.0.3, HBS)