Unable to create thumbnails

Hi, I’m new to WordPress so I really need some help. I like the inline upload feature, but unfortunately it can’t create image thumbnails for me. Everytime I upload an image I get this error message:

Warning: imagejpeg(): Unable to access /hsphere/local/home/blogjunk/mymacbuzz.com/wordpress/wp-content/uploads/mymacbuzz-logo.thumbnail.jpg in /hsphere/local/home/blogjunk/mymacbuzz.com/wordpress/wp-admin/admin-functions.php on line 771

Warning: imagejpeg(): Invalid filename '/hsphere/local/home/blogjunk/mymacbuzz.com/wordpress/wp-content/uploads/mymacbuzz-logo.thumbnail.jpg' in /hsphere/local/home/blogjunk/mymacbuzz.com/wordpress/wp-admin/admin-functions.php on line 771

Warning: Cannot modify header information - headers already sent by (output started at /hsphere/local/home/blogjunk/mymacbuzz.com/wordpress/wp-admin/admin-functions.php:771) in /hsphere/local/home/blogjunk/mymacbuzz.com/wordpress/wp-admin/inline-uploading.php on line 105

When I Save and Continue Editing, I see the uploaded image in the image browser, but it has no thumbnails. I guess I could live with that, but I would really like to be able to have the thumbnails created automatically for me.

I’ve made sure that permissions for the uploads folder is set to 777 and that the owner and group are set to myself. Any suggestions?