User lionc provided a solution that worked for me in this thread:
http://wordpress.org/support/topic/343943
That solution:
go to Settings->Media and click Save Change
@lionc: Your solution worked perfectly, thanks!
I’ve been struggling with this image problem since the release of 2.9, and I’m surprised that not too many people have said anything. I’m dealing with a WordPress site where a majority of the 10+ authors use the WYSIWYG editor–and never touch the HTML–so it became more and more frustrating to correct every single image posted.
