Hi
I had the same problem with my site I could not upload images, and then Ive contacted support at StableHost, they ve told me that it is a common problem with wordpress 3.5 but there is a solution, If I would convert my Jpg image format in to png and try to upload, and surprisingly it is working, and I was able to upload images.
I have followed so many forums last week and everywhere the you read same story about Adobe flash how to install it and nothing worked for me.
Try png format and if it works for you, then tell others, I have seen so many people with the same problem.
