I have been having this issue for several weeks and cannot fix it.
When I go to put a photo in a post (through the normal photo importer in the normal post editor), the photo seems to import fine. When the photo has uploaded, I get a broken image. I can click to edit the image and see my image there. The thumbnail appears broken as well. When I publish the post, the image still appears broken. I recently published a test to see what my readers see.
So far, I have:
* disabled all plugins
* reverted to twenty ten theme
* deleted plugins that were new since the problem started
* upgraded my browser
I am currently adding images by hosting in photobucket and using html. I want to keep my site loading quickly, so I would love to be able to just load images again.