It's been a long couple of days... Same image issues you all are having.  I can make an article fine, however if I upload an image, I get a 500 server error:

"Error 500 - Internal server error
An internal server error has occured!Please try again later."

 

So, onto troubleshooting. 

 


Keep in mind, I have another installation on the same server that is working fine. 
I was originally working with Yootheme's Spark running 1.5.22.  The install that is working is running 1.5.20, so i downgraded, still didn't work.
I thought mabye a conspiracy between ZOO and K2, so I uninstalled ZOO
turned on plugins, turned off plugins, still didn't work
2nd Conspiracy theory: K2 and YooTheme, so started a new installation using PhotoFolio from Shape5
I messed with some random fixes when i googled this issue- same thing- nothing is working

 

I am ready to give up.