I ran into the same issue… I discovered that when the picture URL was put into the browser I received an HTTP error and it could not obtain the picture path..
For me it turned out to be an IIS permission issue. When WP was setup the default permissions did not include the IUSR permission at the root of the site folder ie: C:\inetpub\wwwroot\Cottageonthewater
Now when I invetigated the permissions assigned to the uploads folder I found the IUSR permissions configured
ie: C:\inetpub\wwwroot\Cottageonthewater\wp-content\uploads
I therefore added the READ permission for the User ‘IUSR’ to the root folder:
C:\inetpub\wwwroot\Cottageonthewater
This resovled the issue. The issue here is that the IUSR user is used for the visitor to review/read content and that User did not have rights to access the resource.
Hope this assists someone.
CHeers
