Site won't post images now.

Help, with no action on my part my site is no longer letting me post images. The commands still appear but it just stalls and won’t put the image up.
I don’t know what WP platform I have, the site was finished in June-August. How can I tell what I have? The message says to upgrade to 3.2.1.
I’ve seen some of the questions about how to make it accept images, and the replies and can’t follow the technical answers about php code that seem to be everywhere.

If I upgrade my site to 3.2.1 will I be able to post images like I was a few months back?
What has caused this? Have I used a plug-in that causes this problem?

Except for slight changes to php on one page and a couple of plug ins my site is stock standard, am I at any risk of losing the site if I do the up grade? I’m very worried about this, the site is a big deal and has consumed a lot of months to build, I’d be devastated if there was problems.

My site is; http://www.enfieldresource.com/wp-admin/ and the password is [removed].

Many thanks, this is a big deal for me, and fixing it somehow is crucial,
Roger