From your link I found out that the latest version of Chrome + latest version of Adobe Flash do not work properly together. I tried using Firefox and the media button works. So I think a patch needs to be made for Chrome.
I checked and I am running the current version 11,7,700,225. I am running windows xp. I am using Chrome. I checked and my Chrome is also up to date. So everything is up to date before I had the problem.
I did start turning off some of my plugins. I’m hesitant to turn them all off as I do not know if I have to re-enter passwords, etc to get them running again.
I tried re-uploading the complete folders except wp-content. It did not work.
I do not know why deactivating all plugins and switching to the twentytwelve theme would work. Could you please explain?