Found the issue, but I have no way to resolve it that is going to be an easy fix.
For anyone else wanting to know....
I started up a new wordpress site for testing, added my theme and problem still existed. Removed my theme added twentytwelve. It worked perfect.
So here is the problem.
Several commands that call things into action were changed to work with the new media uploader/ editor.
One being the way resized images are being called. (If you teach a dog come and then say over here, he won't come.) So with the calls changing, anytime my theme uses the old commands it does nothing.
Now the solution options for anyone else with this issue:
Wait for the Theme you are using to fix the issue (Don't hold your breath, this could take a while.)
Start a new wordpress website running 3.4.2 and don't upgrade until your theme fixes the issue.
Switch to TwentyTwelve, start from scratch at rebuilding/ redesigning your theme to work for you.
Sadly the last option is the route I am choosing to take. It's not gonna be easy, cause I have NO idea where to start, but I'm gonna take it little by little and pray.
Currently My theme is a child theme of a theme I liked, but then twisted and turned and warped it into my own. So waiting for updates and changes do me very little to no good.