it's the same problem I am having now on my new server - worked fine on my test server which was windows but I moved everything over to the new redhat server today and now, all uploads are failing - I'm guessing that it's a permissions problem on the server.
EDIT: Found my problem... my linux distro did not have GD installed. Look at your phpinfo and make sure you see GD installed. I ended up having to do a:
yum install php-gd
service httpd restart
and everything lit up !
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