Images replaced by Exclamation Mark

Is anyone else having an issue where an uploaded image is showing as a yellow triangle with an exclamation mark in it.

The images appear to upload ok. But when I try to insert them into a post the image appears as the triangle.

Images inserted with the press this plugin are OK.

Seems to have happened in the latest upgrade to 3.4.2

Any ideas to fix this appreciated.

Alternatively how to I return to the previous version?

Thanks in advance