I’ve had the same problem and found a solution that worked for me earlier in this thread from Taracauc:
I’ve had this problem for each of my wordpress installs and I have finally figured it out.
YOU MUST ADD THE DIRECTORY TO YOUR SERVER!!!
On your server in directory in wp-content folder create a new folder call ‘uploads’
Then login to wordpress and under the Settings –>Miscellaneous
there is a section asking ‘Store Uploads in this folder’ enter wp-content/uploads (even if it says something else or is blank)
This worked (finally!) for me
It worked for me also on two of my blogs. Once I changed the setting to wp-content/uploads (the default), I was able to upload images.
