Had the same issue upgrading to WP 3.4.2 After upgrading I couldn’t upload pic or attach pics to post. Uninstalled and reloaded everything. Still had the problem. Then by change I reinstalled wincache extention 1.1 for PHP from the Microsoft IIS Web site. Presto!!! My problem was fixed. It seem the wincache extention became corrupted in some manner during the Word Press upgrade. You can find the Wincache extension here.
https://www.iis.net/downloads
By the way. I’m using Windows Server 2008 R2, IIS 7.5, SQL Server 2008 R2, FastCGI for IIS, PHP 5.3
If that doesn’t work you might want to upgrade to PHP 5.4 and Wincache 1.3
Hope this helps some of you out there.
