Can’t Upload Images – tried everything

I have previously been able to upload images from my computer last year (2009). Now, when I upload an image everything goes smoothly except the image never actually appears. I get a blank square with the broken image icon in the top left corner.

I have changed permissions from 755 to 777 on my wp-content and uploads folders. It was not creating a 2010 directory so I added one manually via FTP. I tried the .htaccess file troubleshooting. I have searched the forums and checked the media tips and nothing is working.

Any ideas?