Well, I'm toast. I've been searching the forum posts, including the above "Image/Media Uploader problems" post, and Googling until I'm blue inthe face. I've tried everything that has been suggested, including .htaccess tricks, permissions... everything for over four hours now and I just flat gave up. I still got the same http error.
I finally used the No Flash Uploader and was able to upload an image, but get a 404 error when I try to insert it into the post.
I'm toast. I'm done. I don't know what to do now. I regret using the latest Wordpress at this point.
Any suggestions? Why would the latest version of Wordpress be issued if it's unable to upload images?