Like many others I couldn't upload images since I upgraded to 2.5.1.
I was discussing it with Marco Cimmino(Autor of plugin Cimy User Extra Fields) and he assumed the reason could be the memory limit.
So I tried to change from php4 to php5 and it works!
I'm on 1&1 and put the following in the .htaccess:
AddType x-mapp-php5 .php
AddHandler x-mapp-php5 .php
Now everything works fine.
Hope, it helps you.