Huh. I had a problem earlier today. I was getting an upload error, but the jpg was small, so it wasn't a size limit. I was trying to get on with something else, so I figured I'd try again later. I was able to open the jpg on my desktop system, but I haven't yet proved that it's not a semi-corrupt image. I'm not home now, but I'll test again later.
Yes. They are working on the issue. Looks to be a security update peeing in the wheaties. If you need to have images in your post, try imgur or photobucket as a temp solution. This sucks royal left nut.