I’ll be writing more on this is in the future but for now I just want to talk about custom installs of wordpress and a couple problems you may encounter when trying to upload images:

#1 Make sure the folder you have chosen to store your images in is writable. This should be the same for the whole folder. The file attributes on that folder should be 777 and recursed into all subdirectories.

#2 Make sure you’re uploading your files to the right place. This problem happens a lot when sites are being developed and moved to a different server, etc….. You can find where you’re storing your images under Settings > Miscellaneous > “Store uploads in this folder”. Kind of a tricky little spot to find that info.

Hope this helps someone.