Hey guys, after reading every single post on this issue, I found that by just doing a re-install of the latest word press version (3.5.1) from the dashboard or the update tab, everything worked fine.
media uploads … OK
media library … OK
links to pics … OK
WORDPRESS OK!
Even if you already have the latest, just re do it again!
Try that before busting your head with all of the other tech heavy stuff.. Good luck guys!