I've been working with the media gallery in the 2.7 rc1 and am getting errors both from the browser client and the flash client. When I upload using the flash uploader, the file uploads, then it throws an http error. In the browser uploader, I get a 500 error.
IN both cases, the photo actually uploads, but it's not properly thumbnailed. However I do see a thumbnail in the media library, which is strange, unless that's a flash resized image from the full size, and not a true thumbnail.
The issue seems like it's got to do with file permissions. Is there something that needs a little more rights in the media gallery?