TinyMCE Editor has extra formatting/invisible text after using Upload/Insert

I’ve deactivated all plugins, and switched to Twenty Eleven.

In IE7.

I create a new post, if I start entering text into the editor right away, no problems.

If I hit upload/insert, upload my file, and go back to the editor to enter text, the cursor is jacked all the way to the top of the text area, I start typing and the cursor moves as if there is text being entered, but you see no text, I’ve tried clicking over to the html tab to see if there is any formatting and it is blank, but if I type out a word, which is not visible, and then click on the “Remove Formatting” button, my text shows up.

This is driving me nuts, any suggestions?