I was having the same problem with image insertion, on a fresh installation of 2.3.1 (not an upgrage), and with no plugins installed. I found a solution in the code that was appearing in the code editor window: unlike the previous version, this version of WordPress was automatically inserting an image size of 1X1 whenever you didn’t specify dimensions in the “image insertion” window (the previous version would default to the actual dimensions of the image). Thus, it was displaying a tiny dot, a 1X1 version of the image–nearly invisible. I just specified dimensions in the “image insertion” window and voila, the image appeared!
I imagine there’s a code fix for this, to make the image insertion window default to the actual image dimensions–but I leave those things to the more code-adept! ;D
