I seem to be experiencing the same problem many other users are with uploading media on a local server via Chrome. I've researched the posts and done all the things suggested (this started with the visual editor also not appearing):-
1. Deactivated and finally removed all Plugins (no change)
2. Restored back to default template 2012
3. Downloaded a new version of WordPress (3.4.2) and reinstalled the wp-admin & wp-includes directories.
4. Rebooted local server.
5. Tried using Safari instead (thats even worse) I just get a page of code!
I'm up against a client deadline so really need to get this resolved!! Any help greatly appreciated!