I’ve been having issues with the crop tool as well. Except I don’t even have the ability to click on the image and highlight a section to crop.
I have WordPress 2.9 running on two almost identical servers. Both IIS 6, PHP 5.2.6 (with bundled gd library enabled). The crop tool works on one server but not the other, and for the life of me I can’t find any difference between the servers other than the fact that one has gzip compression enabled and the other doesn’t.