Woocommerce plugin creating issues with images

Hello,

After installing woocommerce – excelling eCommerce plugin, media library completely broke. When I try to set featured image, the images never load, and if i try to upload a file, I get the following error:

An error occurred in the upload. Please try again later.

Also, ONet Regenerate Thumbnails plugin stops working, when trying to regenerate thumnails, it says:

there was a connection issue. 5 more entries left.

It uses the entries and outputs:

There were some problems with your server or your internet connection. Please try again later.

I deactivated all plugins leaving only woocommerce and the same problems exist. Without woocommerce everything is fine, I can see and upload images, regenerate thumbnails.

It is almost obviously a theme related problem, I am using Goodnews5 theme, I am new here so not sure if can post a link to it. It says that the theme is compatible with woocommerce 2.1.x and 2.0.x.

I tried a couple versions of woocommerce, the latest as well as 2.0.20.

I hope someone endured with a similar problem and will be able to help.