I do think it’s a WordPress issue.
I have used all the same images, that used to work and no longer do, using Custom Header fro my blog: http://www.daisybrain.wordpress.com. My Theme is Contempt, and it allegedly supports Custom Headers.
My problem is described exactly as Kate describes her problem, but additionally, I’ve noticed that once I try to upload & I click “crop” (although there’s no image there) and it takes me back to the Custom Header page that now shows no image, it will NOT let me change text color, as it used to.
So, obviously, it’s a WordPress problem, since nothing on my end has changed: Same Computer, Same Browser, Same Images, Same Procedure.
I can not get bullets to appear. I am using Firefox and Safari on a Mac. HOWEVER, the bullet points ARE there – they are just invisible! So when I copy text from WordPress & paste it into a word processing program, there are asterisks that magically appear where the bullet points should be.