OK, if I waited 30 more minutes I could have avoided this post… I solved it…
The problem was the WP Smush.it plugin. Deactivate this plugin and all works well.
I tried to post this just minutes after submitting the issue, but I got a bbpress error saying the issue was closed, and wouldn’t accept my update.
I had already increased my memory limits, and the file size was only about 200k.
Thanks.
