This sounds similar to my problem. When I go to insert an image onto a new page that I am attempting to add—via the browser-uploader, URL or the Media Library—when I hit the insert tab, the cursor just blinks within the middle of the pop-up window and nothing ever happens. I have tried it using several themes, including the default and classic themes, and all I get is a blinking cursor. The image is never inserted.
It’s a pain. I can only load images into the sidebars. Does anyone know what the issue is?