Hi, I had been having this issue as well - turns out to have been server issues and permissions issues.
If you can't upload any image at all into a K2 item, there is probably a directory permissions issue. Try setting the /cache directory and the media/k2 directory (along with all its subdirectories) to have as many permissions as possible, 777. Then in your Joomla backend, go to K2, then the Information tab. Under directory permissions, these should all said "Writable". If not, you still have a problem with permissions that you need to fix.
If you can upload .jpg images but not images of other formats, check if you have GD Image Library installed under System Information on that same Information page. If not, this could be why you can't upload .png files, because K2 uses the GD Image Library to convert images of different formats into .jpg format. You probably shouldn't ever run into this problem unless you are working with a special server situation, which my client was.
Hope this helps.