Editor problems – TinyMCE issue

I just updated to 2.2 the other day and now when I create or edit a post when I want to add a picture or a link in the rich text editor, I get the following:

* Insert/edit image

Image URL

Image description
{$lang_insert_image_align}
{$lang_insert_image_dimensions} x
{$lang_insert_image_border}
{$lang_insert_image_vspace}
{$lang_insert_image_hspace}

* Insert/edit link

Link URL

Target
{$lang_theme_insert_link_titlefield}

Looks to me, like there is something missing somewhere that converts the tags to the proper text (and it does convert it for some, but not all as you can see), but I have deleted and re-uploaded all files repeatedly now, to make sure all files are uploaded (I had previously deleted wp-includes and wp-admin), and now I don’t know what to do to fix this. Does anyone know what is causing this error? Which file is responsible for replacing the code with the text?
Thanks.