Disclaimer : This may not work for some blogs running WordPress 2.5 but hey, this fix and workaround worked for me fine.
After upgrading to WordPress 2.5, I have not encountered problems so far regarding all my plugins except for the WP-PostViews Version 1.20 plugin of LesterChan.net for which upgrading it to version 2.20 breaks the plugin because for some reason wp-dbmanager is showing as an upgrade for wp-postViews 1.20 Widget . Anyway, not upgrading the WP-PostViews 1.20 still worked for WordPress 2.5. So don’t upgrade it to version 2.20.
So far I have been enjoying the new Wordpress 2.5, but not up to now for about a week now, the image upload functionality and the inserting of image to post have not been working for me. After clicking the upload button, the login appeared (image 1) and I typed in the account. It then goes back to the upload process, after clicking again the upload button, this time “HTTP error. An error occurred in the upload. Please try again later ” occurred after the crunching process (image 2). I have tested and tried so many times uploading images to all my blogs, but still can’t get through. I have been in constant contact with my web host but still no workaround as of the moment.
So I search on Google to look for solutions and fix for this bug. I then found out that, not only me, many also encountered this kind of WordPress 2.5 image uploading and inserting bug .
Summarizing the list that i found related with this image uploading bug :
- Upload progress gets “stuck”
- Upload fails with an HTTP error
- Upload box does not appear at all
- If the upload window does appear, images can’t be managed, added or inserted into your post
UPDATE: Here is my fix/workaround to this problem:
Disclaimer : This may not work for some blogs running WordPress 2.5 but hey, this fix and workaround worked for me fine.
1. CHMOD the wp-content/uploads folder to 775 or 777.
2. Disable the flash uploader by installing the no-flash-uploader plugin. Be sure to activate it after you upload it to your Wordpress plugin folder.
3. Add this line to your root domain or subdomain .htaccess file (source)
SetEnvIfNoCase Request_URI ^/wp-admin/async-upload.php$ MODSEC_ENABLE=Off
4. Clear your browsers cache
5. Then Log in to your WordPress Dashboard and try to upload and insert image to post.
I guess, this is all that you need to do. I have tried and tested this on Mozilla FireFox 2.0.0.14 and Safari 3.0.4 browsers. Another issue is regarding security risk of using MODSEC_ENABLE=Off to the file async-upload.php. I am not sure and have no idea what is the effect, risk or security issue of using MODSEC_ENABLE=Off. And I hope, this is not a big issue affecting the whole WordPress application.
I Hope this will help you and If you are still experiencing errors following this fix/workaround, feel free to comment and I will try my best to help. Please correct me if I miss something with this fix.
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Thanks! 
i have no problem with the image upload/insert feature charles but the other plugins that “i love the most” are not working and i cannot arrange/customize my sidebar. makawerla jud ay! now i’m thinking of downgrading. LOL! but i’ll give version 2.5 a chance. i’ll use all my powers to fix the bugs. wish me luck!